Pot CEO Job Security Is Getting More Precarious: Cannabis Weekly
Pot CEO Job Security Is Getting More Precarious: Cannabis Weekly
(Bloomberg) -- The cannabis industry’s management exodus is gaining steam.
Since the beginning of January, at least five pot companies have announced the departures of their chief executive officers or a substantial chunk of their senior executive team. The exits have affected both Canadian and U.S. operators.
| Company | Date | Affected executives |
|---|---|---|
| MedMen Enterprises Inc. | Jan. 31 | CEO |
| Sundial Growers Inc. | Jan. 30 | CEO, COO, executive chairman |
| TerrAscend Corp. | Jan. 28 | CEO |
| Flowr Corp. | Jan. 27 | CFO, chief research & innovation officer, chief strategy officer, chief policy & medical officer |
| Supreme Cannabis Co. | Jan. 6 | CEO |
It’s not surprising to see executive turnover in a struggling industry, of course. The average 2019 stock decline of the five companies listed above was 63%, similar to the sector as a whole, and many of them are facing a cash crunch amid mounting quarterly losses and wary capital markets.
However, the management upheaval seems to only be exacerbating investor concerns. Since their announcements were made, Supreme’s stock is down about 23%, Flowr has lost 7.6% and Sundial has tumbled a whopping 53%. As CIBC analyst John Zamparo said of Sundial’s departures: “Such transitions rarely predict positive near-term performance.”
There will likely be more executive departures as the turmoil in the cannabis industry continues.
“I think there’s definitely going to be more bumps in the road for 2020,” said Korey Bauer, chief investment officer of Foothill Capital Management and portfolio manager of its Cannabis Growth Fund. “We’re going to have a few companies that are going to dominate and you’re going to see everybody else just left behind.”
Reality Check
It’s a tough time to be a cannabis company but the broader sector outlook isn’t nearly as bad, according to a new report published by pot data firms Arcview Market Research and BDS Analytics.
“The legal cannabis industry has always lived with a split between reality and perception, but never has the gap yawned as wide as it did in 2019,” the report said.
While stocks were tumbling, consumer spending jumped 46% in 2019 to $14.9 billion. That number is expected to nearly triple to $42.7 billion by 2024, according to Arcview and BDS.
“While valuations of public cannabis stocks may indeed have gotten ahead of themselves in the wake of Canada making history in October 2018 by legitimizing legal cannabis on the world stage, the subsequent sell-off looks extreme from the mid-point of a two-year period in which a $10.2 billion 2018 market appears on track to more than double to $20.7 billion in 2020,” the report said.
Events This Week
TUESDAY 2/4
- WeedMD Inc. holds a shareholder vote related to its acquisition of Starseed Holdings
THURSDAY 2/6
- The International Cannabis Business Conference will be held in San Francisco through Feb. 7
Last Week’s Top Stories
Pot Company Sundial Tumbles Amid ‘Dramatic’ Management Changes
New York Legalizing Adult-Use Pot May Ignite Northeast Empire: Bloomberg Intelligence
To contact the reporter on this story: Kristine Owram in New York at kowram@bloomberg.net
To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Will Daley
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