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Friends – the fact that US cannabis companies can’t file for bankruptcy has created a really interesting dynamic over the past few years. For background, the US federal courts made it clear in 2019 that plant-touching companies may not file and take advantage of the bankruptcy code’s protections such as staying litigation, a process to restructure and resolve claims, and the ability to wipe out debt. State laws (remedies) such as receivership and assignment for the benefit of creditors don’t offer much in the way of relief – they’re at heart just mechanisms to pay off creditors. Bankruptcy is a luxury that cannabis can’t enjoy right now.

When the industry fell into distress in 2019, after the salad days of 2017 and 2018 during which you couldn’t swing a dead cat without hitting an investor willing to throw millions at a pre-revenue cannabis business (I wrote a brief history of this history back in 2020), companies that were out of money and deeply in debt couldn’t take the usual route of filing for bankruptcy to deal with their debts. Instead, companies either cut costs dramatically, negotiated terms with creditors, and hoped for the best; or shut down and hoped to not get sued by creditors. They were stuck.

Let’s then turn our attention then to Flower One Holdings, a Nevada-based cultivator. Although the operating company is a US entity, its publicly-traded parent company is a Canadian entity that filed for the Canadian equivalent of bankruptcy in October 2022. Its restructuring plan, approved in late December, entirely wiped out the public equity and effectively handed over ownership of the company to creditors (note that I’m skipping over a lot of detail). You may be wondering how Flower One could do what other US-based operators that have publicly-traded Canadian parent companies (which is how all of the Canadian exchange-listed US companies are structured). That’s a great question!

Crucially, Flower One had a Canadian parent company, which only US operators with stock trading on Canadian exchanges also have. Second, Flower One appears to have had a significant amount of debt owed by the Canadian parent entity to actually restructure. Debts owed only by the US operating subsidiaries appear to have been unaffected, which makes sense because the Canadian process can’t affect any debts in the US. Third, as best I can tell from the docket, before they filed, they came to agreement with key lenders to the Canadian parent company on the outcome of the restructuring. This is known as a “prepack,” - the primary senior lender with claims against Flower One’s Canadian parent agreed to swap that debt for the equity of the company.

Even with all of that, Flower One still needs to deal with its US creditors (again, because those debts weren’t affected by the Canadian bankruptcy). In order for this to work, Flower One’s management team and new owner (that senior lender) will need to have a plan to manage those remaining US debts. This, I think, is what makes Canadian bankruptcy likely useless for most other US operators with Canadian parents – in general, they tend to have the bulk of their debts at the US subsidiaries, not at the Canadian parent. Again, I’m skipping a lot of detail, and also none of this is legal advice, but Flower One pulled off something that few thought was possible – a Canadian bankruptcy to restructure a US-based operator.

Another interesting example of restructuring is playing out in the California flower market. Aaron Edelheit of Mindset Value just posted an excellent analysis of the decline in cultivation in the state in 2022, resulting in a current inventory shortage and increase in prices after a fairly long-term decline due to overproduction. He notes that canopy has dropped by a meshuggah 14 million square feet, or 17%, since March 31, 2022, about nine months, due to licenses being abandoned and not renewed. Although there are a number of reasons for nonrenewal, I don’t think it’s unreasonable to assume that much of that may be attributed to the fact that flower prices were uneconomically low for so long. That cutback has apparently made a difference – Aaron notes the resulting meaningful uptick in flower prices. It will be interesting to see if this happens in other states with an overabundance of cannabis flower (e.g., Michigan), and whether we also see a similar retraction in other parts of the supply chain.

The typical rules of the workout game don’t fully apply in the cannabis industry (a maxim that may fairly be said of nearly everything in the industry). It requires a dose of pain that’s unexpected by everyone. It also forces lenders and investors to rethink their strategies and underwriting. I suspect we’re going to see a lot more workout activity this year – already we’ve seen Lowell Farms announce that its pursuing “strategic alternatives” and TerrAscend converted into stock C$125 million of its debt owing to Canopy.

I’ve advised countless operators and lenders on the dynamics of workout and restructuring. The usual leverage points and negotiating tactics among creditors and owners simply don’t apply when the threat (or relief) of bankruptcy doesn’t really exist. Nothing in cannabis is easy.

Be seeing you!

© 2023 Marc Hauser and Hauser Advisory. None of the foregoing is legal, investment, or any other sort of advice, and it may not be relied upon in any manner, shape, or form. Subscribe to Cannabis Musings at

Friends – happy new year! It’s that time when we engage in the completely meshuga exercise of predicting what’s going to happen in the cannabis industry in the coming year. But first, a quick word from our sponsor.

As many of you know, after 24 years of being a lawyer, this past summer I left the practice of law and launched Hauser Advisory. I realized that there was a better way to apply the skills I’ve built over two decades in deals and capital markets, as well as the broad and deep national network of relationships and resources I’ve developed in this industry.

Through this platform, I’m advising cannabis companies on macro strategy and major transactions – M&A, investments and loans, restructuring and workout, and the like – as well as helping investors and companies understand and navigate this ever-evolving industry. My goal is to not only guide the process and help the management team make informed decisions, but also to act as a bridge with the outside professionals (lawyers, bankers, accountants), translating what they’re saying and making those relationships more efficient (saving management’s time and money).

In just a few months, I’ve already found that this role allows me to be even more useful to clients and partners, whether as a consultant, board member, or part-time employee. I’m able to give even more direct and practical advice and recommendations, develop connections, and work closely with teams to understand business needs. So, if you could use my help, let’s find a time to talk.

One thing that hasn’t changed is the somewhat regular production of these Cannabis Musings. This year, we’re going to continue to discuss farpotshket goings on in the industry and also consider some of the lessons that I’ve learned along the way.

With that, on to my thoughts about things to watch for in 2023.

  • Federal – I for sure don’t know. I mean, what’s the point anymore of even trying to guess what the President, Congress, the DEA, and the FDA are going to do? (Though, unfortunately, I’ve been correct about SAFE for five years going.) Maybe scapulimancy or haruspication will result in better predictions here. That being said, I do expect we’ll see something interesting when the 2018 Farm Bill (which descheduled hemp) comes up for renewal this year. If the draft Hemp Advancement Act filed by Rep. Chellie Pingree (D-ME) last February has any legs, I’m guessing that the hemp-derived THC (e.g., Delta-8) “loophole” (I put that in quotes because I don’t think the law allows for these products (no loophole), but that’s not legal advice and I recognize that many disagree with this take) will be finally be fixed.

  • States – I imagine that the industry will continue its slow and steady progress opening up markets in the states. I think one interesting trend to follow will be what states do about unlicensed retail sales of hemp-derived THC products – I’m guessing we’ll see more states ban them, even before Congress does something about it (if at all). Also, I'm guessing that Minnesota will fix whatever the heck happened (or didn’t happen) there last year regarding THC-infused edibles.

  • Courts – Related to the states, I think this will finally be the year when the industry gets serious about the question of interstate commerce. Why? Because it won’t have a choice. The various court cases challenging licensing residency requirements have just been the appetizer to the main course that is the recently-filed Oregon case challenging head-on that state’s ban on shipping cannabis products across state lines. I imagine the case will take a long time to make its way through the courts (including appeals), and the State of Oregon will fight hard, but I’ve always been of the mind (not a legal opinion) that these state bans are very likely unconstitutional. I just never expected the challenge to start this soon.

  • Capital – Without any sort of real catalyst to change things, the pain that is cannabis capital markets will likely continue unabated in 2023. Debt will remain expensive and equity will remain nearly non-existent for most companies as investors stay away from the space. I also think we’re likely to see more companies converting their debt into equity (ala Flower One and TerrAscend) in order to reduce leverage, as well as expensive public stock issuances at low price levels (ala Glass House and Agrify) in order to raise much-needed cash.

  • Exchanges – I’ve noticed recently some chatter about whether the Toronto Stock Exchange (TSE) could allow US cannabis companies to list for trading, stemming presumably from the TSE’s apparent lack of opposition (to date) to Canopy’s announced deal to finally close on its acquisition of Acreage, Wana, and Jetty (which we talked about extensively back in October). The thought is that, if the TSE will allow Canopy to remain listed even though it'll post-closing own US-based plant-touching assets, it will certainly allow other US plant-touching companies to list. I personally think there’s a subtle, yet material, business difference (although somewhat illogical) between not delisting Canopy and affirmatively taking on a new listing. That being said, we should all watch how this plays out this year.

  • Mishmash – The FDA will still not issue any regulations or guidance on CBD ingestibles and supplements (keeping my CBD knish truck project on continued hold). Brand collaborations with key prominent celebrities will finally gain real traction as the industry better understands how to market them (after years of many false starts).

Finally, on another personal note, I’m excited to share that I’m now an Adjunct Professor at Northwestern Law (my alma mater) and will be co-teaching a class on cannabis law and policy with some good friends as part of the school’s San Francisco Immersion Program. You won’t be able to take the class unless you’re a law student (a fate I recommend you avoid at all costs), but you can enjoy the Spotify playlist that we’ve created for the syllabus.

Be seeing you!

© 2023 Marc Hauser and Hauser Advisory. None of the foregoing is legal, investment, or any other sort of advice, and it may not be relied upon in any manner, shape, or form. Subscribe to Cannabis Musings at

Friends – it’s a tradition of these Cannabis Musings to look back on my predictions for the year and see how I did. With that, I present to you a recap in sonnet form (with apologies to Shakespeare).

The Senate did not help the industry

By making it much cheaper to go bank.

The feds don’t want to have it be easy

And thus, the cannabis stocks they did tank.

The M & A market slowed to a crawl

As capital continued its retreat.

Lo multiples and profits did appall,

So deal makers signaled their defeat.

Hemp, oh hemp, what can we even say?

You’re now used to produce a mild high.

Oh when will we hear from the FDA?

The states, they’re not just idly standing by.

Interstate limitations took a hit.

My lawyer job I did so fin’ly quit.

It was a very challenging year for the industry all around, meaning that my predictions for a lot of pain (á la Clubber Lang) were unfortunately generally correct. Next week we’ll take a look at the year ahead, and start to dig into some of the lessons we’ve all learned.

Thank you to all of my readers for sticking with Cannabis Musings over the past years and across platforms. I truly appreciate the dialogue. And if your interest in the cannabis industry is growing or reorganizing, or you would like to share your own ode to cannabis, drop me a line and let’s see if I can help with creative solutions, cost-saving measures, and doggerel.

© 2022 Marc Hauser and Hauser Advisory.None of the foregoing is legal, investment, or any other sort of advice, and it may not be relied upon in any manner, shape, or form.Subscribe to Cannabis Musings at

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