Skymint Closes Down Lansing Grow Facility: What's Next For Michigan's Once Leading Cannabis Producer?

Skymint, undergoing acquisition out of receivership, is slated to close its Harvest Park facility near Lansing, Michigan. The 56,000-square-foot plant will cease operations following the termination of approximately 180 employees by March 1, 2024.

This information was revealed in an internal memo obtained by Crain's Detroit Business.

Reasons Behind The Closure

In response to the imminent closure, Skymint attributed the decision to challenges prevalent in Michigan's cannabis sector, including surplus supply, declining prices and rising costs.

"Skymint has faced many of the same challenges as others in Michigan’s cannabis industry, including excess supply, decreasing prices, and cost inflation," stated the company. "As a result, we feel this is the best path forward (...) to remain competitive in the marketplace and ensure sustainable success for Skymint brands well into the future."

As of now, Skymint continues its operations with 22 retail locations across the state, as confirmed by its website. Formerly one of Michigan's leading marijuana producers, Skymint's financial downturn resulted from a combination of plummeting marijuana prices and alleged mismanagement.

Tropics LP's Strategic Acquisition: Canadian leaders Tropics LP, operating now as Skymint Acquisition Co., successfully acquired Skymint out of bankruptcy for $109.4 million in a transaction finalized in October.

• This strategic move was executed through a stalking horse bid. Tropics, a limited partnership wholly owned by an affiliate of SunStream Bancorp Inc., part of a joint venture sponsored by SNDL Inc. (NASDAQ: SNDL), secured Skymint's cultivation assets and 22 retail leases, including dispensaries.

• In a news release, the company disclosed that these dispensaries generated approximately $68 million in annualized sales as of September.

See Also: SNDL Renews CA$100M Share Buyback Plan, Narrows Q3 Net Loss By 78% YoY

Layoffs and Ownership Questions Loom 

Layoffs at the Harvest Park plant are scheduled to commence on Feb. 12, 2024, according to the internal memo. The closure raises questions about whether this decision stems from directives issued by Tropics, the new owners. The deal to acquire Skymint was initially expected to conclude early the following year.

Financial Woes And Legal Battles

• Skymint's financial troubles leading to facility closure and layoffs go back to March when a $127 million lawsuit was filed by Tropics, citing breached agreements. A $70 million loan from Tropics in September 2021, intended for acquiring 3Fifteen Cannabis, worsened financial strain as Skymint failed to meet obligations, prompting additional loans.

• Court filings revealed a sharp decline in Skymint's financial performance, with daily sales plummeting and monthly cash burn reaching $3 million. By 2022, revenues drastically fell to $110 million, a fraction of the projected $263 million. The lawsuit highlighted unpaid taxes and fees, compounding the company's financial troubles.

• In April, Skymint's surrender of the Summit Sports and Ice Complex lease underscored its fiscal challenges, returning the facility to developers by Innovative Industrial Properties Inc. (NYSE: IIPR), a cannabis property developer. IIP, also owning the Harvest Park property, remains silent on the plant's future amid Skymint's turmoil.

Price Action

SNDL's shares were trading 2.71% down at $1.435 per share at the time of writing on Monday afternoon.

Read Next: Michigan's Green Boom: Report From The Second-Largest Cannabis Market In The U.S.

Image by El Planteo