Activist Investor Pressures Cannabist Over Financial Struggles
The Cannabis Company Holdings Inc. (CBOE: CBST), known as Cannabist and formerly as Columbia Care, has come under intense pressure from one of its key debt holders, FiSai US Management LLC. The investor, which owns $50 million of Cannabist’s secured notes due in 2026, has openly criticized the company’s leadership and financial strategy, calling for immediate action to address what it describes as a looming financial disaster.
FiSai’s letter, dated September 26, 2024, outlines a series of grievances regarding Cannabist’s liquidity management, corporate strategy, and overall performance under the leadership of CEO David Hart and board chair Michael Abbott.
The letter details a long list of strategic failures under Hart and Abbott, both of whom have been in their respective roles for over a decade. The firm specifically pointed to Cannabist’s reliance on “just-in-time financing” to avert defaults. This strategy, while temporarily avoiding bankruptcy, has exposed the company to increased financial risk, according to FiSai.
“We believe the Company was forced to obtain a purchase price advance to secure cash for continued operations and immediate liabilities,” FiSai wrote. The investor also accused the leadership of compromising the company’s long-term stability through hasty asset sales, such as a recent divestiture to Verano Holdings (CSE: VRNO).
The sale to Verano, one of Cannabist’s biggest competitors in the Multi-State Operator (MSO) cannabis space, was described as a desperate measure to avoid a liquidity crisis. The sale included the firms Arizona and Virginia subsidiaries for a combined $105 million, of which $35 million was paid in cash upfront. FiSai argues that these types of reactive decisions contradict previous statements from Cannabist, which had identified the assets as core to its growth strategy.
Financial strain
Cannabist is currently facing severe financial strain, with major debt repayments due in the near future. FiSai pointed out that $60 million in debt is due by May 2025, alongside a significant coupon payment in February of the same year. This debt burden is compounded by $185 million in senior secured debt maturing in February 2026.
FiSai expressed particular concern about the company’s performance relative to its peers. According to the letter, Cannabist’s operating margins are among the worst in the MSO sector, and the company’s stock has underperformed, contributing to an over-leveraged balance sheet.
Further complicating Cannabist’s financial outlook are several upcoming market events that could impact the company’s ability to secure financing. The letter specifically mentions the 2024 U.S. presidential election, Florida’s Amendment 3 (a critical marijuana legalization vote), and a forthcoming DEA Administrative Hearing in December, all of which carry uncertainty for the cannabis industry.
FiSai characterized the company’s approach to these risks as a “pray and hope strategy” that leaves them vulnerable to further financial damage.
Lack of engagement
In its letter, FiSai repeatedly emphasized its frustration with Cannabist’s lack of engagement. The investor claimed it has raised concerns about Cannabist’s liquidity on multiple occasions since May 2024 but received little to no response from the company.
“Mr. Hart and Mr. Abbott have refused to engage or discuss the proposed refinancing strategies,” the letter states. FiSai also mentioned that it had offered Cannabist alternatives for refinancing in early September, but the company did not respond.
This lack of communication, FiSai argues, is emblematic of a broader problem at Cannabist—a failure to prioritize collaboration with its stakeholders. The investor urged the company to open discussions about extending its debt maturities and restructuring its balance sheet before it’s too late.
FiSai’s letter also criticizes Cannabist’s broader strategic missteps, including a failed merger with Cresco Labs, another major MSO. The collapse of this deal was a critical blow to Cannabist, which had hoped to use the merger to stabilize its finances and expand its market footprint.
The investor explained that the company had miscalculated the market risks involved in the merger and had failed to secure adequate acquisition financing. This failure, according to FiSai, left Cannabist in a weaker position, with its liquidity issues now more pronounced.
Cannabist’s ongoing divestitures in states like Virginia and Arizona, once considered key growth markets, also point to inconsistent strategic messaging, according to FiSai. These moves have raised questions about the company’s long-term vision and its ability to remain competitive in a rapidly evolving industry.
FiSai ended its letter by demanding a response from Cannabist within five days, urging the company to outline its strategic intentions and concrete steps for addressing its financial problems. Should Cannabist fail to respond, FiSai hinted that further action could be taken to protect its interests, signaling a potential escalation in the conflict between the company and its investor.
Cannabist, for its part, has not publicly responded to FiSai’s letter, and its leadership remains under scrutiny as investors and stakeholders alike watch closely to see how the company will navigate its mounting financial challenges.
Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.