A Michigan court officially approved an order that appoints an independent third party to oversee the financial management of Skymint, the brand name for Green Peak Innovations Inc.
Skymint, which owes its investors at least $135 million and is behind on rent obligations and back taxes, was placed into receivership by a judge last week after the company stopped paying loans provided by SunStream’s affiliate Tropics LP in March last year.
Several investors filed suit against the company, alleging that it had mismanaged their investments and engaged in fraudulent activity.
The court’s order means that the appointed third party will take control of Skymint’s financial affairs and assets to protect the interests of creditors that want to recoup as much of their investment back as possible. In other words, they will now decide whether to liquidate the company or enable its reorganization.
Even though the cannabis industry in Michigan has been growing rapidly in recent years, the industry quickly is becoming highly saturated, with too many businesses competing for a limited customer base across patchwork local regulations.
An oversupply of product also exacerbated plummeting prices and diminishing profit margins.
At least four other cannabis firms in Michigan are being managed by court-ordered receivers. Marijuana remains a Schedule 1 drug at the federal level, preventing firms from using federal bankruptcy courts to settle debts and leaving state circuit courts as the only means for financial protection.
In addition, rising interest rates will only continue to make capital even pricier for struggling companies.
SunStream intends to continue providing financial support to Skymint during the receivership process, with existing employees and management staying in place to provide operational and management services.
“SunStream believes there will be limited disruption to the business and operations of Skymint during the receivership,” the company said in a statement.
The company said that will provide further updates on its loan interests as the receivership process progresses.