Staff
This story was republished with permission from Crain’s Detroit and written by Dustin Walsh.
Embattled cannabis firm Skymint reopened three dispensary locations last weekend after a court ruling settled a squabble between the company and an entity it acquired last year.
Last month, Lansing-based Skymint entered into a court-appointed receivership after being sued by a major Canadian investor.
Skymint, which primarily operates under the parent company of Green Peak Innovations Inc., owes more than $127 million to Canadian investment firm Tropics LP, according to a lawsuit filed in the Ingham County court on March 3.
The lawsuit alleges Skymint was burning through $3 million in cash per month and generated only $110 million in revenue in 2022, $153 million below its forecast of $263 million in sales for the year. A second lawsuit was filed concurrently in Oakland County Circuit Court by New York-based cannabis investment firm Merida Capital Holdings and its affiliates against Green Peak and its executives alleging misrepresentation of financials and mismanagement.
Tropics LP, a subsidiary of Calgary-based Sundial Growers Inc.’s investment firm SunStream Bancorp Inc., originally lent Skymint $70 million towards the acquisition of competitor 3Fifteen Cannabis and its 12 dispensaries in Detroit, Grand Rapids, Ann Arbor, Flint and elsewhere. Merida, a majority shareholder in 3Fifteen, also lent $8 million toward the 3Fifteen purchase.
3Fifteen, however, challenged leadership of the company and retook control of several stores acquired in the deal, including dispensaries in Hamtramck, Grand Rapids, Camden and two in Battle Creek, according to court records.
The Ingham County Circuit Court judge overseeing the suit, however, ruled last week that 3Fifteen must cede control of those stores back to Skymint, determining representatives from 3Fifteen violated the court’s receivership order. 3Fifteen must also return $494,045.24 in funds removed from the 3Fifteen bank accounts at Live Life Credit Union. The court also ordered Live Life to return access of those accounts to Skymint employees.
Representatives from 3Fifteen or Merida could not be reached for comment Monday.
Skymint reopened one of the Battle Creek stores and the Grand Rapids and Camden stores on April 1, representatives from Skymint told Crain’s.
“We are excited that we have reopened our storefronts in Grand Rapids, Camden and Battle Creek,” the company said in an email to Crain’s. “We appreciate the court’s careful consideration in this case, which has restored full operating authority over these locations to Skymint. Our focus now is on continuing to provide customers throughout the state with the exceptional products and service they have come to expect from Skymint.”
Representatives did not immediately respond to an inquiry about the two remaining stores in Battle Creek and Hamtramck, but calls to those locations were received by an answering machine explaining they were temporarily closed.
Tropics and its parent company continue to fund Skymint operations, including paying existing employees and “certain” management while the receiver worked to stabilize finances or prepare the business for a sale.
Skymint, like many others in the Michigan marijuana industry, was crushed by fast-falling recreational marijuana prices in the state.
The price collapse is largely due to product oversupply — recreational marijuana retail prices have plummeted from $512.05 per ounce of flower in January 2020 to just $86 per ounce of flower in February — effectively eliminating margins for many businesses.
At least five other marijuana businesses in the state are under a court-ordered receiver, according to data from the Michigan Cannabis Regulatory Agency and Crain’s research.
Marijuana companies cannot avail themselves of financial obligations in bankruptcy court. Marijuana remains a Schedule 1 narcotic under the federal Controlled Substances Act, leaving marijuana businesses without the benefit of protection under U.S. bankruptcy code.
Gov. Gretchen Whitmer signed amendments to the state marijuana laws to allow for receiverships in 2020.
