Proactive Investors - Shareholders of Canopy Growth (TSX:WEED) Corporation (TSX:WEED, NYSE:CGC) suffered another blow on Thursday as the company announced it had finalized the sale of its California cannabis facility.
The news came on the heels of a string of misfortunes for the Canadian cannabis company, which had once been regarded as a success story in the burgeoning sector.
Far from its 2018 heyday, Canopy is now in the midst of an organizational transformation, which aims to reduce spending and streamline operations.
Since April 1, Canopy has sold a total of five facilities, generating $81 million in proceeds. The company expects to raise up to $150 million from additional facility sales by September 30.
The move is part of Canopy’s desperation to shore up its bottom line, after reporting a fourth-quarter net loss of $648 million and booking asset impairment and restructuring costs of $164 million during the period.
The Modesto facility sale likely won’t be enough to appease analysts who are expressing doubts about the company's ability to reduce its cash burn and turn around its operations.
Benchmark, for instance, has slashed its price target on the company to zero after Canopy shares have suffered a significant decline of 78% this year. Its market capitalization has plummeted from C$25 billion in 2021 to less than C$400 million, leading to its expulsion from the S&P/TSX Composite Index earlier this month.
The company is mired in a fiercely competitive marijuana market amidst a lack of progress on federal legislation in the United States.
Benchmark analysts criticized the company's aggressive expansion into the US market, considering the federal illegality of marijuana, suggesting it might indicate a sense of desperation.
In addition to the facility sale, Canopy Growth has made changes to its accounting firm. The company has appointed PKF O'Connor Davies LLP as its new accounting firm while accepting the resignation of KPMG LLP from the role. According to Canopy, the decision was reached jointly between the company and KPMG.
But analysts are still skeptical about Canopy management's ability to turn around the company's performance. Citing the company's acknowledgment of a going concern risk in its latest annual report, Benchmark stated that Canopy "may not be able to continue operations and meet its financial obligations."
Even if the US were to legalize marijuana at the federal level, that may not be enough to save the struggling company, according to analysts, as it continues to burn cash at a staggering rate.
What the future holds for Canopy – and its shareholders – is anyone’s guess.