Top Cannabis Investment News, Member Posts, Cannabis Investment Daily Indices and more!

3yrs ago Cannabis greenmarketreport Views: 505

-

GenCanna, one of Kentucky’s largest hemp companies, filed for voluntary Chapter 11 reorganization with the U.S. Bankruptcy Court in the Eastern District of Kentucky earlier this year in February. One problem with GenCanna’s bankruptcy filing though was that MariMed (OTC:MRMD) was one of the largest shareholders in the company. It had a $34 million claim against the company sparking a battle over control of the company.

Last week, Law360 reported that MariMed lost a round over the efforts to gain control over the company. The website said that U.S. Bankruptcy Judge Gregory Schaaf of Kentucky found MariMed had acted improperly when it attempted to replace members of GenCanna’s board of directors and force out GenCanna’s president and chief executive officer.

The Fight Begins

In any bankruptcy cases, debtors are first in line over equity holders. In the process of working through its bankruptcy, GenCanna made a deal to sell the bulk of its assets for $75 million. MariMed was against the deal and had its own plan to reorganize the company, but apparently couldn’t come up with the money needed for the plan. According to the Law360 reporting, the court records demonstrated that GenCanna went with the offer it had.

The court records said that MariMed’s president and chief executive officer Robert Fireman, who also sits on GenCanna’s board of directors, teamed up with another board member, Michael Falcone, to form a voting bloc controlling 52% of GenCanna’s parent company’s shares. The two apparently pulled GenCanna Chief Executive Officer Matty Mangone-Miranda, GenCanna President Steve Bevan, and one other member of the board of the parent company, and installed Fireman as chairman, according to court records.

The court filings stated that Fireman and Falcone appointed a new CEO of the parent company, and directed him to get the bankruptcy case dismissed. The new director of GenCanna USA’s board was told to develop a plan to liquidate the company within 30 days.

The ousted executives, Mangone-Miranda and Bevan asked Judge Schaaf to step in claiming MariMed’s actions violated board rules. The Judge agreed saying, “Using an equity position that has no chance of recovery to object to a settlement that is not even filed is an obvious attempt to exercise control over the case and enhance the creditor interests,” Judge Schaaf wrote. “Further, this also suggests clear abuse of the governance process that would warrant action in this court if an injunction was requested. For now, that analysis is not required.”

Basically, since the assets were sold, there is nothing left for the equity owners like MariMed. Since there’s nothing left for MariMed, they have no power to make these types of decisions at the company. GenCanna said it is in settlement negotiations with its senior secured lender and buyer to resolve claims from the committee of unsecured creditors. The settlement is expected to generate roughly $1 million, but the claims are much higher than that.

The assets were sold to New York-based MGG Investment Group, a private lender, and one of the company’s creditors.

GenCanna’s Pain Inflicted On MariMed

GenCanna’s bankruptcy filing also weighed on the shares of MariMed. In April, MariMed’s fourth-quarter 2019 financial results included a one-time charge of $30.2 million as a result of a write-off of its investment in GenCanna. CEO Jon Levine said, “Despite GenCanna’s Chapter 11 filing, we believe that it will emerge with a restructured capital and operational structure that will allow GenCanna to restore its position as a leader in the hemp industry. If this occurs, we believe there will be an opportunity for the value of the assets to be recaptured at a later date.  We expect to continue our strong relationship with GenCanna and jointly pursue opportunities in the evolving hemp industry.”

MariMed’s shares have dropped from 40 cents in February before the GenCanna bankruptcy and were lately selling at 13 cents.

MariMed Loses Round In GenCanna Legal Fight on Green Market Report.


Today's Cannabis Investment Headlines:

Log In for More
Access Over 250K+ Industry Headlines, Posts and Updates
Not a member yet?

Join AlphaMaven

The Premier Alternative Investment
Research and Due Diligence Platform for Investors

Free Membership for Qualified Investors and Industry Participants
  • Easily Customize Content to Match Your Investment Preferences
  • Breaking News 24/7/365
  • Daily Newsletter & Indices
  • Alternative Investment Listings & LeaderBoards
  • Industry Research, Due Diligence, Videos, Webinars, Events, Press Releases, Market Commentary, Newsletters, Fact Sheets, Presentations, Investment Mandates, Video PitchBooks & More!
  • Company Directory
  • Contact Directory
  • Member Posts & Publications
  • Alpha University Video Series to Expand Investor Knowledge
  • AUM Accelerator Program (designed for investment managers)
  • Over 450K+ Industry Headlines, Posts and Updates
ALL ALPHAMAVEN CONTENT IS FOR INFORMATIONAL PURPOSES ONLY. CONTENT POSTED BY MEMBERS DOES NOT NECESSARILY REFLECT THE OPINION OR BELIEFS OF ALPHAMAVEN AND HAS NOT ALWAYS BEEN INDEPENDENTLY VERIFIED BY ALPHAMAVEN. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THIS IS NOT A SOLICITATION FOR INVESTMENT. THE MATERIAL PROVIDED HEREIN IS FOR INFORMATIONAL PURPOSES ONLY. IT DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY INTERESTS OF ANY FUND OR ANY OTHER SECURITIES. ANY SUCH OFFERINGS CAN BE MADE ONLY IN ACCORDANCE WITH THE TERMS AND CONDITIONS SET FORTH IN THE INVESTMENT'S PRIVATE PLACEMENT MEMORANDUM. PRIOR TO INVESTING, INVESTORS ARE STRONGLY URGED TO REVIEW CAREFULLY THE PRIVATE PLACEMENT MEMORANDUM (INCLUDING THE RISK FACTORS DESCRIBED THEREIN), THE LIMITED PARTNERSHIP AGREEMENT AND THE SUBSCRIPTION DOCUMENTS, TO ASK SUCH QUESTIONS OF THE INVESTMENT MANAGER AS THEY DEEM APPROPRIATE, AND TO DISCUSS ANY PROSPECTIVE INVESTMENT IN THE FUND WITH THEIR LEGAL AND TAX ADVISERS IN ORDER TO MAKE AN INDEPENDENT DETERMINATION OF THE SUITABILITY AND CONSEQUENCES OF AN INVESTMENT.