In yet another sign that the licensed California cannabis market is struggling, San Jose-based TPCO Holding Corp. (NEO: GRAM) (OTCQX: GRAMF) announced Wednesday that it had sold off its entire extraction division, a subsidiary called SISU Extraction LLC, for an undisclosed sum.
TPCO, which does business as The Parent Company, is a high-profile brand that partnered with rapper Jay-Z last year, but that star power apparently hasn’t been enough to keep the company afloat.
Rather, the divestiture by TPCO signals tough times for the company, as it readily admitted in a press release.
“The decision to divest SISU was driven by the coompany’s previously announced cost savings initiatives, which are focused on reducing costs, driving efficiencies, and accelerating its path to sustainable, long-term profitability,” the release stated.
Exactly who bought SISU was not disclosed in the release.
But TPCO said that the deal it had reached would “ensure ongoing services for existing clients as well as continuation of employment for SISU employees.”
On top of that, the new owner of SISU has agreed to a “multiyear strategic supply agreement for both cannabis oil and flower brokerage services” with TPCO.
“We are committed to making the difficult choices that are necessary for us to emerge as the leader in the California cannabis market,” CEO Troy Datcher said in the release.
“Given the underperforming wholesale market, this decision will allow us to focus on our profitable omnichannel retail business and brand-building activities closer to the consumer experience, while preserving our balance sheet and avoiding any additional costs,” Datcher said.