After Canada introduced federal cannabis legalization and President Trump signed the 2018 Farm Bill In the US, most if not all of us expected a boom in the cannabis industry. To some extent, we can say the industry has lived up to our expectations, but not without a few companies taking heavy losses. Some companies are contemplating whether to exit the market; others like Wayland Group are filing for bankruptcy, while some have stalled. All these are common for any normal industry.
Unfortunately, some industry pacesetters like Wayland Group are filing for bankruptcy while others are closing shop. Maricann, which was formerly Wayland Group decided to take a shortcut instead of following market trends for their business. In an attempt to inflate the price of their stock, the company bought and overvalued foreign assets to increase the value of the parent company. But it seems the idea was only short lived. Maricann Group is now trying to file for bankruptcy in an attempt to overturn its fortunes.
The Rise and Fall of Wayland Group
Maricann Inc. is a cannabis company that deals with medical marijuana. The company has offices in Germany and Canada. Maricann saw the change of its name to Wayland Group in early 2019 under trade name WAYL in the Canadian security market. Earlier in 2018, Wayland Group had announced an upsize of its planned private placement.
Cannacord Genuity and Corp. and GMP Securities L.P. received 3.5 million in special warrants at a price of $1.60. The business deal indicated the promising fortunes of the company. Cannabis companies were ready to strike a deal with Wayland in what seemed like a serious and giant cannabis industry player. But those hopes came crumbling this year when Wayland’s ship started to capsize.
Early in 2019, the company’s financial reports for Q3 showed that all was not well with the company after an 80% drop in revenues. The company associated the decline with its transition from B2C to B2B business model. But would such a change warrant such a drastic shift in a company’s fortunes? Definitely, no. Investors smelt a rat and that is how the company hit its snag.
In July, the company tried to change its management in an attempt to woo stakeholders into the business but it did not work. Ben Ward, who was the CEO of the company, has been alleged to engage in dubious deals. The rumors further doomed the attempt of a Maricann comeback.
Reasons for the Downfall
At the start of 2018 Wayland Group shares were trading at $2.70 and received a warm welcome into the market. However, the shares listed in Canadian stock market have consistently dropped to merely $0.0104. A whopping 900% drop in the price of the stock. But one would argue that most cannabis companies are making losses due to the uncertainties caused by regulation streamlining, regional regulation variances, and changes in consumer trends. However, there is a difference between Wayland Group and other giant companies making losses in the cannabis industry.
First, Maricann lacks consistency in almost every aspect of a diligently managed company. The changes seen in management of the company indicates there is something more than meets the eye. Mismanagement of the company resources in assets to create an illusion of a stable company has created a negative image of the company. The decline in the value of the company share price also indicates a ridiculous decrease which is almost irrevocable.
Second, Wayland Group put so much focus into the future and forgot the present. It is common in the cannabis industry because it is still in its infancy stage, but we cannot fully turn a blind eye on the present. Maricann took its first loan of $42.5 million from The Green Steaming Financing Company to fund its business. The Wayland Group promised investors heaven during their launch. But what was once a wise investment is haunting the company. In return, the financing company was to get a 20% stake in Maricann Inc.
Wayland Group Filing for Bankruptcy
A company can file for protection from creditors if it deems it impossible to meet its financial obligation at the present.
According to PWC Canada, Wayland in conjunction with Maricann Inc. and Nanoleaf Technology Inc. applied for bankruptcy protection in Ontario Superior Law Court of Justice. The company was given a leeway to borrow $1 million under a debtor in possession (DIP). What does that mean? Wayland Group retains the right to borrow under the protection in an attempt to reorganize the business and turn the company fortunes around.
Wayland Group is caught between a rock and a hard place in its attempt to salvage the company name. Already, investors are wary of what could happen to their investment on the company. With limited time, the company management must figure out a way to get the firm out of the debt hole.
What is Happening in the Cannabis Industry?
Though Wayland Group case may be on the extreme, it is not an exception for other cannabis companies globally. Most are increasing their sales but widening the losses they are making annually. According to reports by Market Watch, the situation is not expected to change any time soon. The projections indicate that industry giants like Canopy Growth will not register positive figures until 2022. One would ask, what will keep such companies going for the next 3 years or so?
The industry is not yet stable and companies are making losses due to regular change of consumer patterns and regulations. If we take the case of Canada, cannabis legalization 2.0 came with its own dynamics. There are consumers who shifted from other cannabis derivatives to edibles. These pattern changes are common for any growing industry and cannabis is not an exemption.
There is widespread concern over frustration of investors from what seemed like perfect investment in the cannabis industry. But 2019 has proved to be a tough year for most industry players due to the unforeseen decline in cannabis stocks.
However, it is those who have braved the current wave and will keep going through the storm that will reap the first fruits in the industry. All is not lost for cannabis investors but one needs to be more careful before placing all the fortunes in a cannabis company. Some have swindled investors’ money through shoddy deals and lack of full disclosure. Wayland Group is a good example of how a once-promising cannabis company can make a U-turn in the wrong direction.