Canopy Growth Corporation (TSX:WEED, NYSE:CGC)'s BioSteel Sports Nutrition business unit has filed for bankruptcy protection in Ontario, Canada under the Companies’ Creditors Arrangement Act and will seek recognition of this in the United States under Chapter 15 of the United States Bankruptcy Code.
The Smiths Falls-based cannabis and consumer packaged goods company said the filing allows it to realize the value of BioSteel’s assets through a sale process while also eliminating significant cash burn.
It said the BioSteel business was a “significant drag” on its profitability and cash flow, representing about 60% of its first quarter fiscal 2024 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA ) loss.
With BioSteel’s operating loss and cash burn eliminated, Canopy Growth reiterated that it expects to achieve positive adjusted EBITDA across its remaining business units exiting the 2024 financial year.
"Canopy Growth has marked yet another major milestone in our transformation plan, as while BioSteel's business has shown significant year-over-year revenue growth, and we believe the brand remains an attractive asset, it does not align with Canopy Growth's cannabis-focused asset-light strategy,” Canopy Growth CEO David Klein said in a statement.
“We have repeatedly demonstrated that we will take decisive action to enhance our profitability and ensure we are focused and positioned to be a leader in the North American cannabis sector.”
Shares of Canopy Growth spiked on the news, adding 21.5% at US$1.41.
The stock is up about 260% month-over-month supported by broader tailwinds in the cannabis sector including U.S. marijuana rescheduling and banking reform hopes.
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