This story was republished with permission from Crain’s Detroit and written by Dustin Walsh.
The struggling Michigan market evaporated profits for Canada’s TerrAscend Corp., one of the world’s largest marijuana companies.
The publicly-traded company (OTC: TRSSF) recorded a $332.5 million loss in 2022, largely due to $311.1 million in impairment charges tied to its acquisitions of Ferndale-based Gage Cannabis and Morenci-based Pinnacle Emporium.
Both Gage and Pinnacle were unprofitable last year, resulting in an annual cash bleed of $26.2 million, TerrAscend reported in its annual financial statement filed Friday with the U.S. Securities and Exchange Commission.
TerrAscend said it effectively overpaid for both Gage and Pinnacle as the value in the Michigan market plummeted due to product oversupply and increased competition.
Today, TerrAscend believes those assets are worth just $61.1 million, or $292 million below what it paid for the two companies last year.
Gage Cannabis operates three cultivation and processing facilities and 18 dispensaries across the state, including in Ann Arbor, Ferndale, Jackson and Detroit. Pinnacle, which TerrAscend plans to rename Gage or Cookies in the future, operates five dispensaries and owns a sixth license, all in rural communities in the state.
Gage and Pinnacle are not the only companies giving Canadian operators financial fits.
Skymint, one of Michigan’s largest marijuana cultivators and retailers, went under court-ordered receivership earlier this month after its Canadian lender Tropics LP sued the Lansing-based company, alleging it owes more than $127 million.
The lawsuit alleges Skymint was burning through $3 million in cash per month and generated only $110 million in revenue in 2022, $153 million below its forecast of $263 million in sales for the year. A second lawsuit was filed concurrently in Oakland County Circuit Court by New York-based cannabis investment firm Merida Capital Holdings and its affiliates against Skymint owner Green Peak and its executives, alleging misrepresentation of financials and mismanagement.
Skymint likely represents the first of many marijuana company failures to come in the nearly decade-long span since the substance was legalized in certain states. It is also the largest corporate collapse in Michigan’s brief history of recreational marijuana since the start of the industry in late 2019.
At least four other marijuana companies in Michigan are also under the direction of a court-ordered receiver, according to data obtained by Crain’s from the Michigan Cannabis Regulatory Agency: Uldaman Inc., which does business as a dispensary Green Planet Patient Collection in Ann Arbor; Rehbel Industries, a grow operation in Lansing; Huron View LLC, doing business as Huron View Provisioning Center in Ann Arbor; and Bay Shore Development Group, a grow operation in Bay City. Michigan’s marijuana industry has suffered an epic price collapse due to product oversupply — recreational marijuana retail prices have plummeted from $512.05 per ounce of flower in January 2020 to just $80.16 per ounce in January this year — effectively eliminating profit margins for businesses across the state.
However, prices may have bottomed out, as the retail per ounce price rose to $86 in February.
Nevertheless, TerrAscend said in its SEC filing it would need access to capital to continue operating and growing its Michigan businesses.