Tag Archives: Corporation

November 9, 2022

A Q&A with Sundie Seefried, President & CEO of Safe Harbor Financial

By Cannabis Industry Journal Staff

As the former CEO of Partner Colorado Credit Union (PCCU), Sundie Seefried has been in the credit union space for 39 years. Established in 2015, Safe Harbor Financial is now a leading provider for banking and financial services in the cannabis industry.

Seefried founded Safe Harbor as a cannabis banking program for PCCU, and since then it has withstood scrutiny of 16 separate federal and state exams. Entering its ninth year as a cannabis banking program, they have almost 600 accounts in 20 states and have processed over $14 billion in transactions for the cannabis market. In September, Safe Harbor began trading on Nasdaq under the symbol SHFS. The company has also announced a definitive agreement to acquire Abaca, an industry-leading cannabis financial technology platform.

Seefried has seen it all in the cannabis banking world. We wanted to get her thoughts on some current events, the future of cannabis banking and lending, and what the next few years might hold in store for an industry ready to grow.

Cannabis Industry Journal: Tell us a bit about yourself. What is your background and how did you find yourself in the cannabis industry? How did you get to become president and CEO of SHF?

Sundie Seefried: I’ve been in banking in the credit union space since 1983. I became CEO of Partner Colorado Credit Union in 2001 and stayed there for 21 years. Everything I do, I have a very conservative nature just from being in the banking world and doing things methodically and building good foundations that endure long term. In 2014 when FinCen issued guidance, I was supposed to retire, and I had dinner with some old friends that were attorneys who couldn’t get bank accounts for their clients in the cannabis industry. They asked me to help and I looked into it for them. I assumed the regulator would shut me down but he didn’t; he actually encouraged me to move forward and look further into things. As I educated the board, we saw just how unsafe Colorado was and the serious need for the community to figure things out with respect to banking and cannabis. Coming from that credit union perspective, I said I think we can do this, let’s try and I’ll go through the third parties necessary. And that’s how we got into this, just looking to try and help solve Colorado’s problems and get banking access for cannabis companies.

CIJ: Tell me about your company’s mission. What is your financing strategy in cannabis and of the companies you do business with, what do you look for most?

Seefried: Our mission remains the same, and that is to normalize banking in the cannabis industry as much as possible. Because the black market still exists, the issue becomes sorting the legal entities out from the illicit actors in the industry. We know that the illicit market is trying to hide amongst the legal environment, which really makes things difficult for upstanding cannabis businesses. We can normalize banking by making sure we help legitimize the compliant entities and sort out the bad actors. We really only want to work with legitimate players with licenses, who are fulfilling expectations on the regulatory level and have no problems with compliance. We have been able to do that on the depository side.

We have always been a low-cost provider and our clients count on that. As we move into the lending part of the industry, we’re looking to do the same thing. There are lenders who charge one-to-three percent per month, 18 to 36 percent per year. We, on the other hand, are targeting more of an eight to thirteen percent annual rate. More of a conservative approach. Real debt underwriting. No extremely high interest rates. We look for the collateral, we look for well-organized businesses and solid documentation. Those are the businesses we are trying to bring into the fold and offer them normal loans. Cannabis will always have a premium on it simply because it is illegal at the federal level and there are additional hoops we have to jump through. Because of the potential forfeiture and seizure, if there are bad actors, etc., it really behooves any clients coming to us to also place their depositary services with us so we can prove their legitimacy and provide loans to them.

CIJ: Let’s talk about the Canopy Growth news. They announced they are pulling the trigger on acquiring Wana Brands, Acreage Holdings and Jetty Extracts, under the Canopy USA holding company and ahead of federal legalization. On the surface, it looks like they are bypassing a lot of the hurdles American cannabis companies currently face with financial red tape. As a foreign company trading on the NASDAQ dealing with a schedule 1 substance, do you expect Canopy to have a significant, some would say unfair, competitive advantage with their early entry? Or is this perhaps more of a rising tide lifting all boats scenario? What effect will this have on the current market landscape?

Seefried: I find it a very interesting move on their part. Certainly, they have a big advantage in comparison to other companies. The consolidation in the industry is moving so quickly. Other players will keep up with this just as fast as Canopy is moving in. That’s my opinion in terms of what I see in the consolidation area of the market. I think what it really hurts is small businesses. My heart goes out to them. So many of them worked so many years to build excellent small companies with boutique shops, and this whole move will really change that part of the industry.

I see a lot of these small players, non-vertically integrated companies, being impacted in a negative way due to such mass consolidation and the entry of foreign businesses. We need to get more competitive on a global level in order for our companies to grow and thrive. This happened back in 2018, when so many companies started doing those reverse takeovers onto the Canadian Securities Exchange and suddenly, they were putting tens of millions of dollars into the U.S. market. People didn’t see that as a competitive disadvantage for American companies, but now this move by Canopy may really show that we have to look at things more globally.

CIJ: Biden’s announcement regarding the scheduling review for cannabis has a lot of industry folks very hopeful that federal legalization is closer to a reality than before. Do you share their optimism?

Seefried: Closer than before, yes. But how close? I am not convinced it will happen quickly. If they are really going to consider rescheduling or descheduling, everything happens in Washington very incrementally. Eight years and seven attempts at the SAFE Banking legislation and still no movement on that front. Tomorrow, we’re going straight to legalization? I have a hard time swallowing that one. I just don’t see that big of a jump all at once. I think it is interesting coming just before the midterms and votes are really needed now more than ever.

What Biden did was a great start. Especially for those people in prison for possession. The interesting part of it is, we are very serious about people who have used it, but the people who have sold it and are in prison might be in the same situation. Given how the laws worked for so long, just based on the amount of cannabis you had could get you automatically labeled as a dealer, which isn’t the case for a lot of incarcerated folks.

The fact is, the social equity and justice issue, who do you free or who do you not free from prison, is a very difficult issue to get through. I think it is a great step forward and it will help some people who were treated unjustly, but there is still a lot of work to be done.

“I believe we’ll start seeing pressure from the global market on the United States to move things along a little faster in our own country.”As far as rescheduling, if they go from a Schedule I drug to a Schedule II drug, that will do no good, but it certainly is a bone to throw to the industry if you want to look like you are making some progress. Schedule II is still subject to 280E tax code so it will only do so much. If they want to make things more equitable and actually level the playing field, they have to do something about the 280E issue hindering every cannabis business in the country.

As far as full legalization, I am not optimistic because of all the players that need to be involved. Full legalization will require a change to the IRS tax code 280E as well as other tax issues. I think there are too many players: The DOJ, FinCen, the DEA, the FDA, the IRS. All of these agencies will have to agree on full legalization and moving forward in unison. The DEA is trying to fight illicit actors and illicit drugs. FinCen is trying to follow the money to find illicit actors. As long as there is an illicit market it will make their job tough, and on top of all of that, we have politics in play. That is just my take on legalization. It is going to be a much more complex problem than just legalizing the plant and moving on. Rescheduling seems like lower hanging fruit, but they will have to move it higher than a Schedule II.

CIJ: With the midterm elections here, there are a number of legalization measures in a handful of states, along with political control of Congress on the ballot. How do you think a Republican or Democrat controlled Congress will affect cannabis legalization progress?

Seefried: I just finished doing some lobbying in September in DC and spoke to some Senator offices in person, and I heard a lot of interesting topics being discussed. One of the things that keeps popping up is that social equity and justice is a huge issue. If we can’t solve this injustice in our system that has been going on for decades and decades, maybe they’ll hold banking legislation hostage. You can’t correct 50-60 years with one piece of legislation. Everything has to be incremental, unfortunately, so there will be some give and take there. I think that was a primary focus, especially with the Democrats and I do think it is a worthy cause.

On the Republican side, economically improving our competitive advantage as a country. They are starting to see the jobs being created and the tax revenue coming in and the growth of the industry. They will have to make that decision at some point in time whether they are going to leave the American cannabis industry behind or allow them to compete on a global level. I really think everything will move slowly and continue as it has happened in the past.

I believe we’ll start seeing pressure from the global market on the United States to move things along a little faster in our own country.

CIJ: As we inch closer to 2023, what do you expect the next year to offer for the cannabis financing market?

Seefried: I would say, with or without legislation, they’re finding greater access to banking. And the reason they are getting better access to banking is because none of us have been prosecuted for simply engaging in cannabis banking. I think we have set a precedent over the past eight years, not only us but other service providers in the industry and that we are not being prosecuted.

I see more financial institutions entering the market slowly. The second reason access to capital and banking will increase is because every financial institution in the country wants that lending relationship. In order to get there, they want to start with the depository relationship, and they don’t want smaller players presently doing it and getting all of those relationships before they enter the market. I think the competitive nature of the financial industry to land that lending relationship is going to force them into the game sooner than later.

August 11, 2022

M&A in Cannabis: A Guide for Buyers and Sellers

By Abraham Finberg, Rachel Wright

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Mergers and acquisition activity in the cannabis space tripled from 2020 to 2021, and that pace is on track to continue in 2022. With big players entering the global cannabis market, we’re fielding more questions about mergers and acquisitions of cannabis businesses.

In this guide, we look at the evolution of the U.S. cannabis industry and some best practices and considerations for M&A deals in this environment.

The New Reality of Cannabis M&A Activity

The industry has evolved since adult use cannabis was first legalized in some U.S. states in 2012. More cannabis companies have a professional infrastructure—legal, financial and operational—with executive teams and board members ensuring the organization establishes proper governance procedures. Investors and private equity firms are showing more interest, and some cannabis companies have celebrated their first IPOs on the Canadian Securities Exchange (CSE).

At the same time, we are seeing a kind of “market grab” by multistate operators (MSOs) looking to acquire various licenses and expand their market share. MSOs tend to understand the current state of the market. For example, in California and some other states, there is a surplus of cannabis on the market for various reasons, partially due to so-called “burner distribution”—rogue distributors using licenses to buy vast amounts of legally grown cannabis at wholesale prices and selling the product on the black market, thereby undercutting retailers and other legal cannabis businesses. Another reason for the surplus is simply the entrance of many legal cultivators into the market over the past year.

Due to these trends, MSOs are interested in acquiring the outlets to be able to sell the surplus cannabis within California and other new markets.

Transferring Cannabis License Rights

One of the biggest challenges to M&A activity in the cannabis sector is the difficulty of transferring or selling a cannabis license.

Different types of cannabis licenses in California

Cannabis licenses are not expressly transferable or assignable under California law and many other states. However, the parties involved aren’t without options. For example, a business that is sold to a new owner may be able to retain its existing cannabis license while the new owner’s license application is pending, as long as at least one existing owner is staying on board. At the state license level, a change of up to 20% financial interest does not constitute a change in ownership, although the Bureau of Cannabis Control (BCC) must be notified and approve the change.

This process can take a while—often a year or more—since licensing involves overcoming hurdles at the local level as well as the state level with the BCC. It’s crucial to talk with legal counsel about the particulars of the license and location early in the process to best structure the terms of the agreement while complying with state and local requirements.

Seeking a Tax-Free Reorganization in the Cannabis Space

In many cannabis mergers and acquisitions, the goal is to accomplish a tax-free reorganization, where the parties involved acquire or dispose of the assets of a business without generating the income tax consequences that would result from a straight sale or purchase of those assets.

IRC Section 368(a) defines various types of tax-free reorganizations, including:

Stock-for-stock exchanges (IRC Section 368(a)(1)(B)

In a stock-for-stock reorganization, all of the target company’s stock is traded for a portion of the stock of the acquiring parent corporation, and target company shareholders become minority shareholders of the acquiring company.

Often, it’s tough to meet the requirements to qualify for this type of tax-free reorganization because at least 80% of the target stock must be paid for in voting stock of the acquirer.

Additionally, companies may be saddled with too much debt. If the acquirer assumes that debt, it may be classified as consideration paid to the seller and therefore disqualify the transaction as a tax-free reorganization.

In other M&A deals, the acquiring corporation may be unwilling to assume the debt of the target corporation—perhaps because showing these items on its balance sheet would impact its debt-to-equity and other financial ratios.

Stock-for-asset exchanges (IRC Section 368(a)(1)(C)

Rather than acquiring the target company’s stock, the acquirer may purchase its assets. In a stock-for assets exchange, the buyer must purchase “substantially all” of the target’s assets in exchange for voting stock of the acquiring corporation.

A stock-for-assets format offers the buyer the benefit of not having to assume the unknown or contingent liabilities of the target. However, it’s only feasible if the acquirer purchases at least 80% of the fair market value of the target’s assets AND all or virtually all of the deal consideration will be stock of the acquirer.

Tax Consequences Arising from Sale of Assets

If the sale price doesn’t consist primarily of the buyer’s stock, the transaction may be a standard asset sale. This leads to very different tax results.

If the seller is a C corporation, it will typically face double taxation—paying tax once on the sale of assets within the corporation and again when those profits are distributed to shareholders. If the target company has net operating losses (NOLs), it can use those NOLs to offset the tax hit.

If the seller is an S corporation, it won’t have to pay corporate tax on the transaction at the federal level. Instead, shareholders will pay tax on the gain on their individual returns.

For the buyer, the benefit of an asset sale is that the assets acquired get a “step-up basis” to their purchase price. This is beneficial from a tax perspective, as the buyer can depreciate the assets and may be able to claim accelerated or bonus depreciation to help offset acquisition costs.

Reverse Triangular Merger

Often, in practice, we come across what is termed as a reverse triangular reorganization. In this type of merger,

The acquiring company creates a subsidiary,
The subsidiary merges into the target company before liquidating,
The target company then becomes a subsidiary of the acquirer, and
The target company’s shareholders receive cash.

Structuring the deal this way may work to overcome the hurdle of transferring the license but may not qualify as a tax-free reorganization.

Bottom Line

The circumstances and motivations for mergers and acquisitions in the cannabis industry are diverse. As a result, there is no one-size-fits-all approach to structuring the transaction. In any event, it’s crucial to start the process early and seek advice from legal counsel and tax advisors to minimize the tax burden and ensure that both parties to the transaction get the best deal possible. If you need assistance, contact your 420CPA strategic financial advisor.

June 24, 2022

Soapbox

Give a Voice to Scientists in the Executive Suite

By Dr. Markus Roggen, Amanda Assen

2 Comments

What do Aurora Cannabis, Tilray and Pfizer all have in common? They all produce and sell products used for medicinal purposes, they are top competitors in their field and they all have statements on their websites claiming that science is one of the most important things to their business. But unlike Pfizer, Aurora and Tilray do not have any positions in the executive suite for scientists or medical personnel. This led us to wonder, why does the structure of their corporate ladder (as well as so many other cannabis companies) not align with what they claim to be their values?

According to Aurora Cannabis, “Science is at the core of what we do”.¹ Look up the definition of “core” and you will get “foundational, essential, central, and enduring.”² Sounds important. Meanwhile, Tilray’s main page states: “For the therapeutic value and risks of cannabinoid-based medicines to be fully understood, Tilray believes it is critical to evolve current scientific understanding of the field.”³

You would assume that somebody in the executive suite would have a position and an educational background relating to the central and enduring part of a business, right? We looked at 10 of the biggest Canadian cannabis companies, their founders’ educational backgrounds and whether there were executive positions for science, R&D or medicine (Table 1). We also looked at the same data for the top 10 biggest pharmaceutical companies (Table 2). As expected, every pharmaceutical company had upper-level (C and/or P level) positions for scientists and/or medical personnel. However, only 2 of the 10 cannabis companies had this.

To figure out why this is, (as scientists) we did some research. It turns out, the consensus is scientists are bad at commercialization. Scientists are rarely successful as CEOs because they are (usually) not good at attracting customers and get confused by things like revenue models.⁴ As Akshat Rathi bluntly put it, “just because you are the smartest person in the building does not make you capable to run a company.” In fact, many CEOs of life science companies got to the top by pursuing business, finance, marketing or sales. In the 90s, some life science companies took a chance on scientists and hired them as CEOs, but when they hit financial turmoil, they quickly undid this.⁵

So maybe scientists aren’t always cut out to be the CEO of a company. But that still doesn’t explain why so few large cannabis companies have a chief scientific/medical officer, or even a president of R&D.

Maybe we are looking in the wrong place. Maybe their value of science can be demonstrated by their spending on research. Typically, a larger agricultural company will spend 9% or more on R&D, and a smaller company will spend 2-4%.⁶ Meanwhile, the major pharmaceutical companies we looked at spent between 12 and 25% of their revenue on R&D during their most recent fiscal year. Since a cannabis company falls somewhere in between we approximate they would spend around 9-12%.

However, Canopy Growth was the only company that fell into our prediction range, spending 10.5% of their revenue on R&D in 2021.⁷ Tied for a distant second place were Charlotte’s Web and Aurora Cannabis (a subsidiary of Tilray), spending 4.6%. At the very bottom were Tilray which only spent 0.16% on R&D and TerrAscend which spent 0.21% during their most recent fiscal year.^8,9 With most of the cannabis companies, we saw a gradual decrease in R&D funding over time, which intensified with the Covid-19 pandemic.

So why the heck are these companies going on about how they value science? To give them the benefit of the doubt, maybe they do think they value science, but they don’t know how to value it.

It’s hard for a company to take actions that show they value science if there are no voices for scientists at the executive level. After all, how can you make decisions based on science if nobody in the room understands it? Sure, we saw the argument that people who make it to the top can “learn enough science to ascend to the executive suite without much trouble”.⁵ But what is “enough science”? The mitochondria is the powerhouse of the cell?

This leads to our argument for putting scientists in the executive suites of cannabis companies and giving them a more powerful voice. Whereas scientists are not good at marketing, those in managerial roles tend to overly rely on intuition – even when the evidence is against them.¹⁰ For those relying on intuition, R&D is an easy target during times of crisis (like a global pandemic). Cutting costs in R&D yields a short-term immediate increase in profit and the negative impacts are often not felt until years later.¹¹ However, cutting R&D investment is the opposite of what you should do during a time of crisis. Evidence suggests companies that maintain or even increase spending in marketing and R&D and focus on operational efficiency (such as process optimization) are the ones that will come out as the top competitors in the long run.^12,13 Having a chief scientific officer or an executive for R&D with a scientific background can help sustain companies by promoting R&D during hard times and indicating what projects will be the most promising to help the company optimize their processes.

Having a scientist in the executive suite can also help keep everyone in check. “Senior execs live in a feedback loop of positive reinforcement making them unlikely to question their decisions,” according to Stefan Thomke and Gary Loveman.¹⁰ They claim the best way for those in managerial roles to avoid over relying on instinct and break out of that positive feedback loop is by “thinking like a scientist”. This involves not letting bias get in the way of truth, studying anomalies, being skeptical, developing strong hypotheses, producing hard evidence and probing cause and effect. To add to this, we think a major part of thinking like a scientist is by having at least one high up in the team. In our own company, giving equal value to scientific voices has resulted in all parties learning and thriving by making fact-based decisions.

Finally, scientists deliver! To be a scientist (with a PhD), one must master the field, find a gap in the knowledge, then fill that gap – all for little pay and no guarantee of a job at the end. This makes them dedicated workers whose main goal is to contribute something unique to their field, or in this case, their company.¹⁴ Having someone up top who is dedicated, passionate, innovative and trained to look for gaps in knowledge can be an invaluable voice in the executive suite. They are likely to point out potential money-saving solutions (i.e.: optimizing extraction conditions) that others up top may not have thought of on their own.

If you feel strongly that science is at the core of what you do, and you already know that R&D is crucial for the long-term survival of your company, you are already on the right track. In addition to this, consider giving a voice to scientists at the executive level in your company. The cannabis industry is still in its infancy. This means there is potential for R&D in more than just new product development. Basic stuff like extraction, modifying plants to be heartier against harsh conditions and pathogens, curing and safety testing processes have all barely been studied and optimized to reduce costs. These things won’t be solved by a Juris Doctor, an MBA or even an engineer, they will be solved by scientists, and it will take a scientist up top to ensure the whole company recognizes the importance of these projects.

Table 1: Top cannabis companies stats on founders and their educational backgrounds, presence of scientific executive positions and spending on research and development

Company	Founders	Founder’s Educational Backgrounds	Science executive position?	% Revenue spent on R&D
Aphria Inc. (now owned by Tilray)	Cole Cacciavillani and John Cervini	Cole: B. Eng John: Born into a family greenhouse business	Chief science officer Garry Leong: B.Sc. Chem, M.B.A. Quality Management ¹⁵	NA
Canopy Growth Corp	Bruce Linton and Chuck Rifici	Bruce: Ba Public Policy, Minor: Economics. ¹⁶ Chuck: B. Eng, MBA	no	10.5% ¹⁷
Aurora Cannabis Inc. (subsidiary of Tilray)	Terry Booth, Steve Dobler, Dale Lesack and Chris Mayerson	Terry: Master Electrician¹⁸ Steve: B. Eng Chris: Concrete business Dale: Electrician and homebuilder	no	4.6% ¹⁹
Village Farms International Inc.	Michael A. DeGiglio	BSc Aeronautic Science	no	No data available on R&D expenses
Tilray Inc	Brendan Kennedy, Christian Groh, Michael Blue	Brendan: Ba. Architecture, Msc: Eng, MBA²⁰ Christian: Ba. unknown, MBA²¹ Michael: Ba. Finance, MBA²²	no	0.16% ²³
Ayr Wellness Inc	Jonathan Sandelman	Juris Doctor, Law Degree²⁴	no	No data on R&D spending available
TerrAscend Corp	Michael Nashat	Pharm. D . Post doc in Neuroscience²⁵	no	0.21% ²⁶
HexoCorp	Sebastien St-Louis	Ba. Economics, MBA ²⁷	no	3.09% ²⁸
Fire & Flower Holdings Corp	Trevor Fencott	Ba (unknown), and Law degree²⁹	no	No data on R&D spending
Zenabis Global Inc (now owned by hexo corp)	Rick Brar, Mark Catroppa, Monty Sikka	Rick: Ba. (unknown) Mark: Ba. Finance ³⁰ Monty: Ba Accounting and Finance³¹	Chief science Officer: Natasha Ryz PhD experimental medicine.³²	NA

Table 2: Top pharmaceutical companies founders and their educational background, presence of executive positions for scientists and spending on R&D

Company	Current Executives	Educational Background	Science executive positions?	% Revenue spent on R&D
Amgen	Robert A. Bradway	BSc. Biology, MBA³³	Chief Medical officer: Darryl Sleep, M.D. ³³ Senior VP in R&D: Jean-Charles Soria PhD molecular Biol, MD	18.5% ³⁴
Sanofi	Paul Hudson	Ba. Economics, honorary doctorate in business³⁵	Executive VP, R&D: John Reed, MD, PhD in Immunology³⁵	14.51% ³⁶
Bristol-Myers Squibb	Giovanni Caforio	MD.³⁷	Chief Medical Officer: Samit Hirawat, MD. Rupert Vessey: Executive VP: R&D PhD molecular immunology ³⁷	24.58% ³⁸
Takeda	Christophe Weber	PhD. pharmacy and pharmacokinetics, Msc. pharmaceutical marketing, accounting, and finance³⁹	Director President, R&D: Andrew Plump, MD. Ph.D. in cardiovascular genetics ³⁹	14.25% ⁴⁰
AbbVie	Richard A. Gonzalez	No college degree. Practical experience in biochemistry research.	Vice chairman and president, R&D: Michael E. Severino, MD, Bsc biochem⁴¹	12.60% ⁴²
Novartis	Vasant Narasimhan	Bsc. Biology, MD, Msc Public policy	President, Biomedical research, James Bradner M.D. President innovative medicine, Victor Bulto: Msc. Chemical engineering, health economics, and pharmaeconomics, MBA. Chief medical officer, John Tsai BEng. MD⁴³	18.04% ⁴⁴
Merck	Robert M. Davis	Ba Finance, MBA, Juris Doctor⁴⁵	Executive VP and president of Merck Research Laboratories; Dean Li MD, PhD cardiology⁴⁵	25.14% ⁴⁶
Johnson & Johnson	Joaquin Duato Vanessa Broadhurst Peter Fasolo	Joaquin: MBA, Master of international management Vanessa: Ba, Master of Business Administration Peter: PhD in organizational behavior, Msc. Industrial Psychology, Ba Psychology⁴⁷	Executive VP, Chief Medical Safety Officer; William Hait MD. PhD Oncology Executive VP, Pharmaceuticals R&D; Mathai Mammen MD. PhD Chemistry	15.69% ⁴⁸
Pfizer	Dr. Albert Bourla Sally Susman Payal Sahni Becher Rady Johnson	Albert: Doctor of Veterinary Medicine (biotechnology) Sally: Ba Government Payal: Ba psychology, Msc Psychology Rady: Accountant⁴⁹	Chief Development Officer: William Pao: MD. PhD oncology Chief Scientific Officer, Worldwide R&D: Mikael Dolsten; MD. PhD Tumor Immunology⁴⁹	17.01% ⁵⁰
Roche	Dr. Severin Schwan, William N. (Bill) Anderson, Dr. Thomas Schinecker, Dr. Alan Hippe	Severin: Ba economics, PhD law William: Msc in management and chemical engineering Thomas: Bsc genetics, Msc molecular biology, Phd molecular biology Alan: Ba, Phd in administration⁵¹	CEO Roche Diagnostics; Dr. Thomas Schinecker; PhD in Molecular Biology⁵¹	23.563% ⁵²

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Takeda Pharmaceutical Co Stocks Page. YCharts.
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Pfizer Executive Leadership Page. Pfizer https://www.pfizer.com/about/people/executives.
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Roche Holding AG Stock Page. YCharts https://ycharts.com/companies/RHHBY.

May 19, 2022

Canopy Growth Acquires Jetty Extracts

By Cannabis Industry Journal Staff

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Canopy Growth Corporation, one of the largest cannabis companies in the world, announced the acquisition of Jetty Extracts this week for $69 million. Jetty Extracts was founded in 2013 and is now a leading cannabis brand in California and a top 5 brand in the vape category. The two companies plan to expand Jetty’s offerings in California, Colorado, New York and across the broder to Canada, according to a press release.

Canadian-based Canopy Growth is a massive international company that has been expanding its presence well beyond Canadian borders. For years now. Their medical arm, Spectrum Therapeutics, is a leading brand in Canada and Germany.

Some of the Jetty Extracts product offerings

Back in 2018, Canopy solidified a partnership and took considerable investment from Constellation Brands on a long-term play to enter the cannabis beverage market. Then in 2019, they began their aggressive expansion into the U.S. through the multi-billion-dollar deal with Acreage Holdings who, at the time, was the largest U.S. cannabis company. In April of last year, they inked a deal with Southern Glazer’s Wine & Spirits following the launch of their first CBD-infused beverage line sold in the United States, Quatreau.

Late last year Canopy Growth announced a deal to acquire Wana Brands, the number one cannabis edibles brand based on market share in North America. The latest acquisition of Jetty Extracts this week follows the same pattern of increasing their North American footprint in the cannabis market considerably.

David Klein, CEO of Canopy Growth, says the cross-border potential excites them. “”Canopy Growth is building a house of premium cannabis brands with a focus on the core growth categories that will power the market’s path forward, now including Jetty – a pioneer of solventless vapes,” says Klein. “There are significant opportunities for Jetty to scale at the state-level across the U.S. by leveraging Canopy’s U.S. ecosystem, and we’re actively working on plans to bring the brand to the Canadian recreational market.”

April 22, 2021

Canopy Growth Signs U.S. Distribution Deal

By Cannabis Industry Journal Staff

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Canopy Growth Corporation, the Canadian cannabis powerhouse moving its way throughout international markets, has signaled another move into the United States to push their new CBD beverage line. The company inked a deal with Southern Glazer’s Wine & Spirits, a large U.S. alcohol distributor.

This follows the launch of their first CBD-infused beverage line sold in the United States, Quatreau. In the initial phase of the agreement, Southern Glazer’s will distribute the beverage line in seven states, with plans to expand that footprint considerably in the coming months.

Being a national distributor with a strong presence throughout the country, Southern Glazer’s will be moving Canopy’s beverage line in conventional retail stores. The press release seems to credit Canopy’s partnership with Constellation Brands as the catalyst for the new distribution deal. “The agreement also showcases the benefits of the company’s strategic relationship with Constellation Brands, the global beverage leader,” reads the release.

Back in 2018, Constellation Brands made a $4 billion bet on Canopy, but immediate profitability did not come to fruition. This new deal with Southern Glazer’s, as well as the launch of the Quatreau beverage line, seems to prove Constellation’s bet is beginning to pay off, or at least showing signs of a long term play for market share.

April 6, 2021

Political & Corporate Lobbying Influences Emerge in Cannabis

By Cannabis Industry Journal Staff

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In a press release sent out this morning, a new coalition announced their launch to “end the prohibition, criminalization, and overregulation of cannabis in the United States.” The Cannabis Freedom Alliance (CFA) says their core values include federal descheduling, criminal justice reform, “reentry and successful second chances,” promoting entrepreneurship in free markets and reasonable tax rates.

Who’s Behind the CFA?

The organizations that founded the CFA are Americans for Prosperity (AFP), Mission Green/The Weldon Project, the Reason Foundation, and the Global Alliance for Cannabis Commerce (GACC). Take a look at that list and see if you recognize the names. AFP is a well-known conservative and libertarian political lobbying group founded and funded by the Koch brothers. The Reason Foundation, another Libertarian think-tank and an advocate for prison privatization, also listed the Koch brothers as some of their largest donors in disclosures filed in 2012.

The Koch family business, Koch industries, makes hundreds of billions of dollars a year in the oil and gas industry and has held massive political influence for decades. They regularly donate hundreds of millions of dollars to Republican campaigns. Historically, they’ve played a major role in opposing climate change legislation. They’re widely known as conservative advocates for lower corporate taxes, less social services and deregulation.

Interestingly enough, prominent criminal justice reform advocate Weldon Angelos and rapper Snoop Dogg appear to have joined forces with the Koch-backed group, CFA, following a Zoom meeting where Charles Koch told them he thinks all drugs should be legalized, according to Politico. “We can’t cut with one scissor blade. We need Republicans in order to pass [a legalization bill],” Angelos told Politico. The tie between cannabis legalization and traditional Republican and Libertarian values is obvious: their free market, personal liberties and small government ideology fits well within the legalization movement.

Big Oil, Alcohol and Tobacco, Oh My!

The Coalition for Cannabis Policy, Education and Regulation (CPEAR) is a group that was founded in March 2021. Two of the founding members are Altria, the company that makes Marlboro cigarettes, and Molson Coors, a multinational alcohol company. The CPEAR website says that they want to work on responsible federal reform. “We represent a vast group of stakeholders — from public safety to social equity — focused on establishing a responsible and equitable federal regulatory framework for cannabis in the United States.”

Founding members of CPEAR also include: The Brink’s, a private security firm, the National Association of Convenience Stores, the Council of Insurance Agents & Brokers and the Convenience Distribution Association. In other words, the group is made up of large and powerful corporate interest groups that represent the alcohol, tobacco, insurance and security industries.

Both NORML and the Drug Policy Alliance (DPA) have spoken out against CPEAR. Erik Altieri, executive director of NORML, says it’s a matter of corporate interests coming in and working to change laws for their companies to capitalize on legalization. “We’ve seen how big corporate money and influence have corrupted and corroded many other industries,” says Altieri. “We can’t let the legal marijuana industry become their next payday.”

The DPA also released a statement opposing CPEAR. Kassandra Frederique, executive director of the DPA, says that she urges caution to elected officials in taking counsel from these corporate powers. “We have long been concerned about the entry of large commercial interests into the legal marijuana market,” says Frederique. “Big Alcohol and Tobacco have an abysmal track record of using predatory tactics to sell their products and build their brands – often targeting low-income communities of color and fighting public health regulations that would protect people.”

While their motives and desired outcomes remain unclear, it is apparent that we’re reaching a new age in the cannabis legalization movement, one where powerful corporations outside of the cannabis space want in. Whether its oil and gas, insurance, security, tobacco or alcohol, these groups are using their power and money to influence cannabis policy reform.

January 4, 2021

The Cannabis Industry and Tax Implications of Entity Structure: Issues to Consider

By Calvin Shannon

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This piece is intended to provide some considerations that current and potential license holders should think about as they work with advisors to make entity selection decisions or consider potential tax elections. Please note that this article is a high-level overview and is not intended to declare the best type of entity structure for a license holding entity. Although there are numerous tax variables that should be contemplated, tax issues are not the only concerns relevant to determining entity type. In addition, some states may tax entities differently than how the entity is taxed for federal purposes.

First, let’s look at the legal entity types that may be set up to hold a license, operate a business and what that may mean for how an entity is taxed. Often, entities are set up as either limited liability companies or corporations.

If a limited liability company is organized and the entity is owned by only one owner, a single member LLC, the default tax treatment would be that the entity is disregarded for tax purposes. In other words, it would not file a separate federal income tax return, except in some states including CA, TX, TN and RI. All the tax consequences of the activities within the legal entity are reported on the tax return of the owner of the entity.

If a limited liability company is set up and the entity is owned by more than one owner, a multiple member LLC, the default tax treatment would be that the entity is taxed as a partnership. An entity taxed as a partnership reflects the tax consequences of the activities within the legal entity on a partnership return. The partnership generally does not pay tax on the activity, but rather the taxable income and loss are passed through to the owners of the LLC. The owners of the LLC reflect the taxable income or loss on their tax return and are responsible for paying any resulting tax. In the rare instance of an entity being audited, there is a possibility that the entity may have to pay tax on the partners behalf, depending on the ownership structure. Either a single member LLC or a multiple member LLC may elect to treat the LLC as a C-corporation or an S-corporation for tax purposes.

The Taxation of C-Corporations & S-Corporations

The default treatment for an entity set-up as a corporation is the entity will be taxed as a C-corporation. An entity taxed as a C-corporation, including an LLC electing to be taxed as a C-corporation, pays the tax on any taxable income generated by activities within the entity. Additionally, any distributions of earnings from the C-corporation to the owners of the entity are generally considered dividends which are required to be reported as taxable income by the owners when received. In other words, the earnings of an entity taxed as a C-corporation are potentially taxed twice. Once, as they are earned within the entity, and then again upon distribution to the owners of the entity.

An entity set-up as a corporation, a single member LLC or a multiple member LLC may elect to be treated as an S-corporation. Like an entity taxed as a partnership, an S-corporation does not pay tax at the entity level, but rather passes the taxable income and loss through to the owner or owners. Additionally, like a partnership, distributions from an S-corporation are not taxable as dividends to the owner when received.

Since we covered how different entities are taxed based on how they are set-up, and what elections they may or may not make, we will explore some of the issues that should be considered when making an entity selection. We will also address potentially electing to treat an entity one way or another for tax purposes.

S-Corporations

Advantages: The advantages of an S-corporation are limited to the avoidance of double taxation associated with C-corporations, as well as some potential benefits of lower Social Security and Medicare taxes.

Disadvantages: The primary disadvantage of an S-corporation for a license holding company is any non-deductible expenses resulting from 280E are passed through to the owner(s), which then reduces the ownership’s tax basis in its investment in the entity. A reduction in tax basis is determinantal to owners of an entity because the basis is used to reduce taxable income when/if the owner liquidates ownership in the entity.

Other disadvantages of S-corporations include but are not limited to restrictions on ownership of the entity, a requirement for reasonable compensation paid to owners and a lack of flexibility in the allocations of earnings among owners.

Partnerships

Advantages: The advantages of a partnership include but are not limited to the avoidance of double taxation associated with C-corporations, flexibility in the allocation of earnings and losses among owners, and flexibility in the type of owners of the entity.

Disadvantages: Like S-corporations, the primary disadvantage of a partnership is any non-deductible expenses resulting from 280E are passed through to the owner(s).

Other disadvantages of partnerships include potential self-employment taxes on earnings allocated to active owners, potential complexity in the allocations of taxable income and losses among partners in entities with many owners or different classes of ownership.

C-Corporations

Advantages: In contrast to S-corporations and partnerships, the tax basis resulting from the ownership’s investment in the entity is not subject to reductions from non-deductible expenses being passed through to owners. This protection of tax basis is particularly important to owners of license holding entities.

An additional advantage of C-corporation tax treatment may be a lower tax rate applied to taxable income.

Disadvantages: The most significant disadvantage of C-corporation tax treatment is the potential double taxation of earnings that might be applicable if the entity does have earnings that are distributed.

In addition to the items address above, the advantages and disadvantages of the entity type and related tax elections, additional considerations include:

How much of the 280E nondeductible expenses will the taxpayer be subject to?
How much earnings will the entity be distributing to the owners?
How complex is the entity’s ownership?
The lack of certainty regarding whether or not the qualified business income deduction (QBID) enjoyed by pass-through entity owners is allowable as a deduction by owners receiving pass-through income from an entity subject to 280E.
Are there plans for selling the entity and if so, what is the time horizon for doing so?

At Bridge West, we advise taxpayers to consult with cannabis advisors who have experience in the industry, can help navigate the complexities of tax compliance and Code Section 280E and are experienced with entity structures.

February 10, 2020

Judge A Book By Its Cover: Why Understanding Information Economics is Critical to Gain Consumer Trust and Build a Sustainable Brand

By Nathan Libbey

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Information economics has existed for decades and drives much of how products, including cannabis, are marketed and purchased. One of the essential frameworks that guides information economics are the search, experience, and credence properties of a product (Patterson, 2017). Understanding these different product attributes is key to setting up a sustaining cannabis product, corporation, and industry.

Search

The search attribute of a product is largely what we see prior to the purchase of a product. Images, claims, and packaging may all contribute to the search attribute of a product. You’ve got a good-looking, flower, pre-roll or edible, and it shows well on your insta page. Information is seemingly symmetrical between agency and consumer, what you see is what you get. In the developing cannabis industry, firms are investing a tremendous amount of resources into search attributes.

Experience

What is the effect of the product? There are two aspects of the experience attribute in information economics. Testimonials may be also considered experience attributes, as they give a user knowledge of how a product tastes, how long it takes to kick in, how long it lasts and descriptions of how others perceived the product’s deliverables. Despite testimonial power, experience is largely personal and occurs only after the product is consumed. Information is seemingly symmetrical; you get the experience that the agency planned and you anticipated. Advances in genetics, homogeneous production methods and potency testing demonstrate that the cannabis industry is investing in experience attributes.

A level playing field where transparency is at the forefront of all transactions will help solidify trust and drive sustainable growth. So, your product looks good, tastes good, and has very positive reviews. Customers can’t get enough; they are voting with their wallets for your product. But there is a third part of information economics you may be missing.

Credence

Credence attributes rely on information asymmetry. Think of used cars as a textbook example: sellers of used cars rely on asymmetry to motivate purchases. Highway miles, adult driven, oil changes every 3,000 miles, etc. are claims that can only be verified by the seller, the buyer has no way of knowing if these are true or not. Credence attributes can’t be verified by the seller due to lack of knowledge or expertise (Ford et al, 1988). The same goes for a consumable good like cannabis, only the grower or manufacturer knows what occurred in the “back of the house.” Product safety, therefore, is a credence attribute of cannabis products.

Investing in credence attributes in a young market may seem cost prohibitive. Many in the cannabis industry simply want to follow whatever the state they operate in dictates as the minimum allowable. In hemp we see states that require QR codes on each product that link to a COA, but many do not. Does the cost to produce the COA and QR code make a product more eye-catching or enhance the experiences? No, but those producing it may pay a hefty price if and when the product makes someone sick.

If a firm relies on fragmented, disparate regulatory bodies to dictate their investments in product safety, they will eventually face credence issues. Is smokable flower grown in Texas safer than that grown in Maine? We don’t have data to support either regulation’s effectiveness, so a firm or industry must dictate what the standard is and stick to it.

We need only look at the leafy green industry to see an example of a product that did not break any regulatory guidelines yet continued to sell a good with very negative credence attributes. How long were folks getting sick from leafy greens prior to them identifying the source? No one knows and that is what makes credence attributes so hard to pin down and develop an ROI formula for. Inputs that yield not-sick people aren’t known until someone gets sick. For leafy greens, they had an advantage – years of studies showing that they were good for you. Cannabis, unfortunately, doesn’t have that leg to stand on and faces an uphill battle gaining public trust.

As soccer moms (and dads) across the nation start to work cannabis into their play date wine sessions, the industry must ensure that they are investing in all avenues of information economics. A level playing field where transparency is at the forefront of all transactions will help solidify trust and drive sustainable growth.

References

Patterson, M. (2017). The economics of information. In Antitrust Law in the New Economy (pp. 39-60). Cambridge, Massachusetts; London, England: Harvard University Press. Retrieved February 7, 2020, from www.jstor.org/stable/j.ctvc2rkm6.6

Ford, G., Smith, D., and Swasy, J. (1988), An Empirical Test of the Search, Experience and Credence Attributes Framework, in NA – Advances in Consumer Research Volume 15, eds. Micheal J. Houston, Provo, UT : Association for Consumer Research, Pages: 239-244.

January 23, 2020

Constellation Has A Moment Of Reflection But Not Sour Grapes Over Canopy Investment

By Marguerite Arnold

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Constellation Brands, the beer brewer behind Corona and Modelo, has finally admitted the obvious. Its four-billion-dollar bet on the Canadian cannabis company Canopy Growth in 2018 was a long-term play for market share, not immediate profitability. Indeed, Canopy has yet to turn a profit and its shares are down 30% from this time last year. So far Constellation has lost $71.1 million of its investment in the cannabis industry company leader. That is 19.25% of its total investment in 18 months. In other words, hardly insignificant.

That said, Canopy is not, by any stretch of the imagination, “down for the count.” If their overexpansion plans and statements over the last three years have been, at best, optimistic, they have not done anything broadly different than any of their other major competitors (see Aurora for example). And have still emerged, financial bloodbath although it has been so far, four years after entering the European market at least, with global presence that is not going anywhere. Even if in some markets overall sales are lower than hoped or anticipated.

At least two quarters of real reorganization and reshuffling in every office on every continent the country does business in have at least resulted in a major victory in Luxembourg at least that will bear fruit for years to come. That is a strategic victory worth a few dings along the way.

Starting, almost certainly, in 2021, when changing laws in Europe will also allow the company to bring together its background and reach in the spirits industry to a world that is finally opening to the blending of the cannabis world into the same.

This year, in other words, will almost certainly see the company continue to service its existing steady business in multiple countries – however unfancy that may be. And it is decidedly not glam here. In places like Germany the company is essentially only holding onto market share in the medical market by its purchase of the largest dronabinol maker in the country.

That said, beggars cannot be choosers. Aurora in contrast, is looking at a serious review of its cultivation licenses and practices. In the meantime, Canopy snagged a lucrative contract for a strategic, central country in the European debate – Luxembourg – that no matter how small, that will create at least a trickle of medical sales until the country changes its laws.

One of the things that the Canadian cannabis industry has in spades, and this is absolutely true of Canopy, is accurate business acumen about market entry timing and overall strategy.

No matter how much cannabis industry execs, in other words, have only been positive and upbeat before, this statement by Constellation also signals a change in the way Canopy presents itself externally.

Mistakes have been made. It is time to clean house and move on.

What other new industry in the lifetimes of those alive today, continues to admit its mistakes and pivots less than a decade after its global birth in continual pivot and expansion mode? The only other one that comes close is of course the internet. And these days, more specifically, Internet 2.0.

So, as the world says hello to 2020, Canopy seems to be sending its new year message. Trimming the sails after a wild, wild year, and setting course again, for a greener horizon.

September 4, 2019

From CannTrust To Canopy: Is There A Connection To Current Cannabis Scandals?

By Marguerite Arnold

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As Europe swooned under record-breaking heat this summer, the cannabis industry also found itself in a rather existential hot seat.

The complete meltdown at CannTrust has yet to reach a conclusion. Yes, a few jobs have been lost. However, a greater question is in the room as criminal investigatory and financial regulatory agencies on both sides of the US-Canada border (plus in Europe) are getting involved.

As events have shown, there is a great, big, green elephant in the room that is now commanding attention. Beyond CannTrust, how widespread were these problematic practices? And who so far has watched, participated, if not profited, and so far, said nothing?

Who, What, Where?

The first name in the room? Canopy Growth.

Why the immediate association? Bruce Linton, according to news reports, was fired as CEO by his board the same day, July 3, 2019, that CannTrust received its first cease and desist notice from Health Canada.

Further, there is a remarkable similarity in not only problematic practices, but timing between the two companies. This may also indicate that Canopy’s board believed that Linton’s behaviour was uncomfortably close to executive misdeeds at CannTrust. Not to mention, this was not the first scandal that Linton had been anywhere close to around acquisition time. See the Mettrum pesticide debacle, that also broke right around the time Canopy purchased the company in late 2016 as well as the purchase of MedCann GmbH in Germany.

Reorg also appears to be underway in Europe as well. As of August, Paul Steckler has been brought in as “Managing Director Europe” and is now based in Frankfurt. Given the company’s history of “co-ceo’ing” Linton out the door, is more change to come?

What Went Down At Canopy?

Last year, Canopy announced its listing on the NYSE in May. To put this in context, this was two months after the first German cultivation bid went down to legal challenge. By August 15, 2018 with a new bid in the offing, the company had closed the second of its multi-billion dollar investments from Constellation.

Bruce Linton, former CEO of Canopy Growth
Photo: Youtube, TSX

Yet by late October, after Bruce Linton skipped a public markets conference in Frankfurt where many of the leading Canadian cannabis company execs showed up to lobby Jens Spahn (the health minister of Germany) about the bid if not matters relating to the Deutsche Börse, there were two ugly rumours afoot.

Video showing dead plants at Canopy’s BC facility surfaced. Worse, according to the chatter online at least, this was the second “crop failure” at the facility in British Columbia. Even more apparently damning? This all occurred during the same time period that the second round of lawsuits against the reconstituted German cultivation bid surfaced.

Canopy in turn issued a statement that this destruction was not caused by company incompetence but rather a delay in licensing procedures from Health Canada. Despite lingering questions of course, about why a company would even start cultivation in an unlicensed space, not once but apparently twice. And further, what was the real impact of the destruction on the company’s bottom line?

Seen within the context of other events, it certainly poses an interesting question, particularly, in hindsight.

Canopy, which made the finals in the first German cultivation bid, was dropped in the second round – and further, apparently right as the news hit about the BC facility. Further, no matter the real reason behind the same, Canopy clearly had an issue with accounting for crops right as Canadian recreational reform was coming online and right as the second German cultivation bid was delayed by further legal action last fall.

Has Nobody Seen This Coming?

In this case, the answer is that many people have seen the writing on the wall for some time. At least in Germany, the response in general has been caution. To put this in true international perspective, these events occurred against a backdrop of the first increase in product over the border with Holland via a first-of-its kind agreement between the German health ministry and Dutch authorities. Followed just before the CannTrust scandal hit, with the announcement that the amount would be raised a second time.

German health authorities, at least, seem doubtful that Canadian companies can provide enough regulated product. Even by import. The Deutsche Börse has put the entire public Canadian and American cannabis sector under special watch since last summer.

Common Territories

By the turn of 2019, Canopy had announced its expansion into the UK (after entering the Danish market itself early last year) and New York state.

And of course by April, the company unveiled plans to buy Acreage in the U.S.

Yet less than two weeks later, Canopy announced not new cultivation facilities in Europe, but plans to buy Bionorica, the established German manufacturer of dronabinol – the widely despised (at least by those who have only this option) synthetic that is in fact, prescribed to two thirds of Germany’s roughly 50,000 cannabis patients.

By August 2019, right after the Canopy Acreage deal was approved by shareholders, Canopy announced it had lost just over $1 billion in the last three months.

Or, to put this in perspective, 20% of the total investment from Constellation about one year ago.

What Happened At CannTrust And How Do Events Line Up?

The current scandal is not the first at CannTrust either. In November 2017, CannTrust was warned by Health Canada for changing its process for creating cannabis oil without submitting the required paperwork. By March of last year however, the company was able to successfully list on the Toronto stock exchange.

Peter Aceto arrived at CannTrust as the new CEO on October 1 last year along with new board member John Kaken at the end of the month. Several days later the company also announced that it too, like other major cannabis companies including Canopy, was talking to “beverage companies.” It was around this time that illegal growing at CannTrust apparently commenced. Six weeks later, the company announces its intent to also list on the NYSE. Two days later, both the CEO and chair of the board were notified of the grow and chose not to stop it.

Apparently, their decision was even unchanged after the video and resulting online outrage about the same over the destroyed crops at the Canopy facility in BC surfaced online.

On May 10, just over a week after the Bioronica purchase in Germany, the first inklings of a scandal began to hit CannTrust in Canada. A whisteblower inside the company quit after sending a mass email to all employees about his concerns. Four days later, the company announced the successful completion of their next round of financing, and further that they had raised 25.5 million more than they hoped.

Six weeks later, on June 14, Health Canada received its warning about discrepancies at CannTrust. The question is, why did it take so long?

Where Does This Get Interesting?

The strange thing about the comparisons between CannTrust and Canopy, beyond similarities of specific events and failings, is of course their timing. That also seems to have been apparent at least to board members at Canopy – if not a cause for alarm amongst shareholders themselves. One week after Health Canada received its complaint about CannTrust, shareholders voted to approve the Canopy-Acreage merger, on June 21.

Yet eight days after that, as Health Canada issued an order to cease distribution to CannTrust, the Canopy board fired Bruce Linton.

One week after that, the Danish recipient of CannTrust’s product, also announced that they were halting distribution in Europe. By the end of August, Danish authorities were raising alarms about yet another problem – namely that they do not trust CannTrust’s assurances about delivery of pesticide-free product.

Is this coincidence or something else?

If like Danish authorities did in late August 2019, calling for a systematic overhaul of their own budding cannabis ecosystem (where both Canadian companies operate), the patterns and similarities here may prove more than that. Sit tight for at least a fall of more questions, if not investigations.

Beyond one giant cannabis conspiracy theory, in other words, the problems, behaviour and response of top executives at some of the largest companies in the business appear to be generating widespread calls – from not only regulators, but from whistle blowers and management from within the industry itself – for some serious, regulatory and even internal company overhauls. Internationally.

And further on a fairly existential basis.

EDITOR’S NOTE: CIJ reached out to Canopy Growth’s European HQ for comment by email. None was returned.

Correction: This article has been updated to show that the Danish recipient of Canntrust’s product announced they were halting distribution one week after Bruce Linton’s firing, not one day.