Weathering the Storm: Cannabis Companies Confront Financial Turbulence and Seek Solace in Strategic Mergers and Restructuring

Cannabis companies, notably MGC Pharmaceuticals, navigate severe financial challenges and market volatility through strategic responses like restructuring, issuing discounted shares, and engaging in mergers, exemplifying the broader industry's struggle and adaptability amidst economic upheavals.

Challenges in the cannabis industry

Despite achieving operational milestones, MGC Pharmaceuticals faces financial difficulties due to adverse market conditions. The company’s share price has nosedived by more than 98% since its listing on the London Stock Exchange, making it challenging for the organization to raise funds. In response to these challenges, MGC plans to implement a financial restructuring plan and issue new shares at a significant discount. With this move, the company aims to secure financial stability and provide innovative medicines globally.

  • The first cannabis company listed on the London Stock Exchange in 2021.
  • Shares have fallen by over 98%, hindering the ability to raise funds.
  • MGC will implement a restructuring plan to tackle this issue, and issue discounted shares.

HANetf Medical Cannabis ETF Merger with Healthcare Fund

Meanwhile, the Medical Cannabis and Wellness UCITS ETF, Europe’s first medical cannabis exchange traded fund, is undergoing a merger with another fund due to its lack of viability. HANetf launched this fund in January 2020 with assets totaling $8.6 million across different sectors within the medical cannabis, hemp, and CBD industries. However, poor performance and no expected value improvements led the firm to consider merging the fund into the broader healthcare ETF, HAN-GINS Indexx Healthcare Megatrends Equal Weight UCITS ETF.

Shareholders have approved the merger as an alternative to closing down the fund. This change will provide them exposure to a similar investment portfolio while avoiding cannabis-related securities.

  • Europe’s first medical cannabis ETF to merge with a broader healthcare fund.
  • $8.6 million initial assets across the medical cannabis, hemp, and CBD sectors.
  • Merging with HAN-GINS Indexx Healthcare Megatrends Equal Weight UCITS ETF.

Akanda’s Property Development Agreement

In another development, Akanda has entered into an agreement granting them rights to develop a property for two years. The company compares this deal to a mining agreement in which operators purchase rights for mining sites. Under this arrangement, Akanda will make the initial payment through shares using a formula outlined in the agreement. These payments will be divided into three installments upon signing and 15/30 days after signing, respectively.

Additionally, Akanda will pay $750,000 when they receive approval for hemp cultivation and another $750,000 upon CBD cultivation approval.

  • The agreement grants Akanda property development rights for two years.
  • Initial payment made using company shares following a specific formula.
  • Akanda to pay additional fees upon receiving cultivation approvals for hemp and CBD.

Implications for the Cannabis Industry

These recent events highlight the ongoing challenges faced by companies operating within the cannabis industry. Financial hardships, lack of viability, and changes in market conditions have contributed to restructuring plans, mergers, and unconventional agreements. As such, it remains crucial for organizations to adapt and embrace new strategies that address these particular industry risks while seeking innovative opportunities for growth and profitability.

Rita Ferreira

Rita Ferreira

Rita is a seasoned writer with over five years of experience, having worked with globally renowned platforms, including Forbes and Miister CBD. Her deep knowledge of hemp-related businesses and passion for delivering accurate and concise information distinguish her in the industry. Rita's contributions empower individuals and companies to navigate the complexities of the cannabis world, and her work remains a valuable resource for those seeking a deeper understanding of its potential.

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