The Parent Company Restructures, Loses Monogram

Jay Z takes ownership of his luxury brand.

After the market closed on Thursday, TPCO Holding Corp. also known as The Parent Company (OTCQX: GRAMF) announced that it has changed its agreements and restructured the relationship between Roc Nation LLC, SC Branding, LLC, and The Parent Company. Despite the celebrity affiliations, TPCO has consistently lost millions of dollars as revenues have failed to live up to expectations.

According to the company statement, Shawn ‘JAY-Z’ Carter and affiliates and Roc Nation will return approximately 7.1 million common shares of The Parent Company. This is expected to help the company save roughly $33.5 million in top-line costs over an eight-year period. The stock has tumbled since its original $10 pricing shortly after the SPAC that created it went public. It was lately selling at 19 cents a share.

In addition, Roc Nation has agreed to forgo future The Parent Company equity payments and SC Branding has also agreed to forego future cash and equity payments.

Monogram Moves Out

The restructuring will also send ownership of the Jay Z brand “Monogram” to an entity designated by SC Branding and its affiliate, Shawn ‘JAY-Z’ Carter. The Parent Company will continue to have an exclusive and royalty-free eight-year license to commercialize Monogram in California. TPCO will be able to sell all current Monogram products, but also have the right to sell future Monogram products in all form factors.

“Collectively, we have agreed to restructure our partnership in order to afford The Parent Company the best opportunity to execute a longstanding and successful strategy,” said Shawn “JAY-Z” Carter. “We are excited for the continued growth of The Parent Company and our future together in the cannabis industry.”

The company stated that Desiree Perez, CEO of Roc Nation and Dania Diaz, Managing Director of Philanthropy at Roc Nation will remain in their roles with the company’s social equity ventures investment advisory committee as both entities work collaboratively on initiatives to help repair the harms created by the prohibition of cannabis. The parties say they are united in their drive to empower entrepreneurs in underserved communities by providing a platform for those who have been historically marginalized and disenfranchised by the unequal application of legislation.

“I want to sincerely thank JAY-Z, Desiree Perez and the entire ROC team for their significant creative contributions. I look forward to continuing our exciting work together to create products and brands that address the needs of consumers in the world largest cannabis market,” said Troy Datcher, Chief Executive Officer, and Chairman of The Parent Company. “Importantly, this arrangement significantly reduces our ongoing financial commitments and protects shareholders from future dilution while transforming our business into a platform for future brand collaborations. We will continue to leverage our position as a world-class brand builder by working with authentic leaders and innovators in the industry. As we prepare our company for potential national exposure, I’m thrilled with the innovative brand developments we expect to roll-out in the coming months.”

TPCO spokesman said, “We are committed to making the difficult choices that are necessary for us to emerge as the leader in the California cannabis market. As a company, we’ve transformed the business in the last few quarters by closing the acquisition of multiple dispensaries including Coastal and Calma. We’ve also increased efficiencies as seen through our new wholesale distribution agreement with Nabis, which will lower our annual operating expenses and expand our already-wide reach by introducing our premier brands to more consumers. This amended agreement with Roc is just another example of The Parent Company’s commitment to preserving our cash balance and providing significant value to our shareholders.”

TPCO Flames Out

TPCO has always seemed a little disjointed starting with two names. TPCO and The Parent Company. It was created through a SPAC in 2020 bringing together Carter, Roc Nation, Caliva Cannabis and Left Coast Ventures. At the time they said Caliva and Left Coast Ventures expected combined pro forma revenues of $185 million in 2020 and $334 million in 2021. Instead, sales for 2021 were only $178 million. Respectable, but nowhere near what had been projected.

The celebrity affiliations didn’t sprinkle the company with success dust either. With expensive photo shoots at chic homes and a high-quality video series (also likely very expensive) the company spent like crazy to create an image that didn’t deliver the lofty projections.  TPCO took a staggering charge of over half a billion dollars for 2021. It continued to hang onto that luxury image as the consumers began gravitating towards value-priced items in the California market. The resurgent illicit market in the state also presented powerful competition causing many brands to price accordingly.

Still, the company ended 2021 with roughly $163 million in unrestricted cash. TPCO began selling off assets and laying off employees. However, it continued to burn through more cash and found itself in a position of just hoping to retain at least $100 million in cash by the end of 2022.

In November, TPCO reported it lost $134.6 million in the three months ended Sept. 30, bringing losses for the year to $196.6 million despite cost-saving moves that included laying off employees “throughout 2022,” for a cumulative 33% cut of staff by Oct. 27.

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.

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