Greg McLeish of the Toronto office of Mackie Research Capital found that 25 companies are down to half-a-year of cash when capital expenditures and cash-flow burn are taken into account.
McLeish predicts more companies will make hard decisions to defer planned facility expansions in order to reallocate capital as the industry devalues mass-scale cultivation capacity to focus on actionable markets.
“I think what we’ll see next year is they’ll revisit some of their (capital expenditure) plans, and they’re realizing that they don’t need to necessarily build out all the cultivation assets that they were thinking of,” McLeish told Marijuana Business Daily.
McLeish expects some companies to file for protection from creditors under the Companies’ Creditor Arrangement Act (CCAA) – the Canadian version of Chapter 11 protection in the United States – so they can regroup to avoid going into receivership or bankruptcy.“I think they’re going to have to be nimble enough to do that, because capital is not as readily available. And you do have 32 companies with net debt positions.”
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