Canopy Growth Corp (TSE: TSX:WEED) has decided to pursue bankruptcy protection for BioSteel Sports Nutrition Inc. Its shares ended more than 10% up on Thursday.
Why does Canopy want to sell BioSteel?
The cannabis company will now seek permission from a court to sell that brand.
Canopy expects to book a C$15 million ($11.09 million) to C$20 million charge in its second and third quarters as it lays off Biosteel employees. Its press release reads:
BioSteel filing immediately eliminates significant cash burn for Canopy Growth and provides for an orderly realization of value of BioSteel’s assets through a sale process.
BioSteel made up roughly 60% of Canopy’s core loss on an adjusted basis in the first financial quarter. The Canadian firm now expects a C$95 million decline in its debt over the next six months.
Canopy has been committed to cutting costs
Canopy Growth reiterated doubts on its ability to keep afloat last month even after divesting its Canadian retail business, quitting a few international markets, and lowering headcount as well.
Still, its shares have more than tripled since mid-August.
Much of that upside has been a feature of recommendation from the U.S. Department of Health and Human Services to reclassify Marijuana as a Schedule III drug (source). David Klein – its Chief Executive also said in a press release today:
We believe [BioSteel] does not align with Canopy Growth’s cannabis focused asset-light strategy. We have repeatedly demonstrated that we will take decisive action to enhance our profitability.
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