Pot producer Canopy raises going concern doubts, shares tumble

(Reuters) – Shares of Canada’s Canopy Growth (NASDAQ:) fell 6.5% on Friday after the pot producer posted a wider quarterly loss over the previous year and raised doubts about the company’s ability to continue as a going concern.

The Canadian cannabis industry remains challenged by systemic regulatory issues, continued battle with the illicit marijuana market and delays in government action on both sides of the border, CEO David Klein said in a call on Thursday.

Canopy reported a net loss of C$648 million ($490.69 million) for the fourth-quarter ended March 31 from last year’s C$589 million, hurt by impairment charges and restructuring costs.

The company’s revenue also fell short of expectations due to weak results at its BioSteel unit, which produces sports nutrition products.

“Internally at Canopy, we faced executional challenges,” Klein said.

Canopy said it identified certain trends in the booking of sales for BioSteel, leading it to launch an internal review. As a result of the review, Canopy said it has let go of several members of BioSteel’s leadership team.

Once a multi-billion company, Canopy has seen its fortunes dwindling over the years and is now valued at just under C$400 million.

The company continues to double down on its efforts to turn profitable, including cost cuts through layoffs, exits from some international markets, store closures and divestiture of its retail business across Canada.

Cost reductions undertaken during the year were on track to reduce headcount by over 1,200 positions.

“Looking ahead, visibility remains limited,” said Bernstein analyst Nadine Sarwat.

Sarwat added that Canopy was still burning through cash and including going concern risk in the filing makes Canopy USA’s rationale unclear, as cash won’t flow back to the U.S. unit without federal legalization.

Canopy is eyeing an entry into the U.S. cannabis market through Canopy USA.

($1 = 1.3206 Canadian dollars)