The cannabis industry is proving to be challenging for many companies, prompting several to exit the market altogether. The plant remains illegal at the federal level in the United States, with little sign of legislative change on the horizon. Banking issues persist, and businesses are unable to claim standard tax deductions. Additionally, the variability of state regulations and the significant drop in wholesale cannabis prices have made it difficult for operators to remain profitable.
Several companies have recently decided to shift their focus away from cannabis as they grapple with these challenges. For instance, 22nd Century Group, a low-nicotine tobacco company, initially ventured into cannabis by acquiring CBD company GVB Biopharma in a deal worth between $55 million and $60 million in 2022. However, by 2023, the company sold GVB for just $2.5 million in an effort to cut operating expenses and manage debt.
City View Green Holdings is another company that has abandoned its cannabis pursuits. After obtaining a cannabis processing license in April 2021, the company failed to generate revenue from its edibles business and reported a loss of C$244,328 in its most recent quarter. In January, City View warned investors of a potential pivot out of cannabis, and this month, it announced plans to spin out its subsidiary, 2590672 Ontario Inc., in preparation for a reverse takeover transaction.
Scotts Miracle-Gro, primarily known for its fertilizers, initially thrived with its Hawthorne subsidiary, which focused on hydroponic indoor cannabis growing. However, profits turned into losses, leading the company to spin off Hawthorne in January.
BC Bud Corp. also announced a shift in strategy, declaring its intention in February to transition from a cannabis-focused business to an investment firm targeting digital and physical non-fiat assets. Following through on this plan, the company rebranded in March as Digital Commodities Capital Corp. and changed its trading symbol to RIPP.
Neptune Wellness Solutions made headlines in 2023 by leaving the cannabis sector, a decision that their Chief Financial Officer, Raymond Silcock, indicated was a relief. He noted that the cannabis business faced an “untenable regulatory environment” and that divesting this segment had removed significant obstacles to profitability. Neptune sold its cannabis business for C$5.15 million and is now concentrating on other ventures.
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