Canadian cannabis company Canopy Growth (NASDAQ:WEED) has announced its intention to seek bankruptcy protection for its sports nutrition products division, BioSteel. This move is part of Canopy’s ongoing efforts to manage its expenses effectively.
Following the announcement, Canopy’s shares saw a 9.6% increase in early trading as the company anticipates reducing its debt by C$95 million over the next two quarters.
Canopy has been facing liquidity challenges and has implemented various cost-cutting measures to improve profitability. These measures include staff reductions, exiting certain international markets, closing stores, and divesting its retail business throughout Canada.
In June, Canopy expressed doubts about its ability to continue operating as a going concern, and it reiterated these concerns in August.
BioSteel, a significant contributor to Canopy’s fiscal first-quarter adjusted core losses, has been under review for potential strategic actions for some time. In June, Canopy also disclosed that it was being investigated by the U.S. Securities and Exchange Commission (SEC) regarding the reporting of revenue from BioSteel.
As part of the bankruptcy protection process, Canopy plans to lay off 181 employees from the BioSteel division. The company expects to incur charges ranging from C$15 million ($11.09 million) to C$20 million related to these workforce reductions, with the charges being recorded in the second and third quarters.
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