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LPs That Received a Lump of Coal

As we head into the first full year of legal cannabis across Canada, many licensed producers can look forward to rollouts of new crops, the integration of edibles and extracts, and various other promising ventures. For two LPs however, things have not been so rosy.

One of the most publicized cases is Ascent Industries, through their subsidiary company Agrima Botanicals. Agrima was notified on November 16th of Health Canada’s intention to revoke their license and the company has appealed the decision as of December 17. Ascent has since laid off 36% of its Canadian staff and seen the departure of a board member, the CEO, COO, and the President of the company as well. Ascent’s stock also went down over 60% during this tumultuous time.

Although the reasons behind the suspension and potential revocation of their license have been fraught with rumour and innuendo, the aftermath is quite real. “Agrima Botanicals has been the only licence holder to receive a suspension over the past year,” said a spokesperson from Health Canada in an interview with Cannabis Retailer.

“Agrima Botanicals was granted two licences under the previous regulations (ACMPR), which were then transitioned to licences under the Cannabis Regulations on October 17, 2018. On September 26, 2018, Health Canada suspended these licences for non-compliance with the ACMPR and Narcotic Control Regulations. On November 16, 2018, the Department issued Agrima Botanicals a notice of intent to revoke its licences under the regulations. Health Canada is taking this action because, amongst other reasons, the company has failed to demonstrate that the suspension was unfounded and that the failure that gave rise to the suspension was rectified.”

Another LP that currently finds itself in hot water is Winnipeg-based Bonify. It has been alleged that the company bought illegal cannabis and then sold it in the government-regulated recreational cannabis market. The news has sent shockwaves through the Manitoba industry, with Premier Brian Pallister calling the situation “a black day for the distribution of legal cannabis.” Pallister adds, “It casts a pall on the other companies, who didn’t do anything wrong, who are working through the system. We want to make sure we protect the integrity of that system, because our competition is the underground economy.”

Since the announcement, Manitoba sales and distribution of Bonify products have been suspended. “If it turns out it’s true that a licensed producer knowingly bought illegal cannabis from the black market, and then sold it into the legal market knowingly, I don’t see how the government can do anything less than take their licence away,” said Matt Maurer, vice-chairman of the cannabis law group at Toronto firm Torkin Manes LLP in an interview with The Winnipeg Free Press.

Finally, there is yet a third licensed producer, which has arguably not had a very merry holiday, but for non-Health Canada-related reasons. On December 3, a co-authored report was released by Quintessential Capital Management and Hindenburg Research alleging that Aphria Inc. vastly inflated prices for what is being called “worthless assets” in Latin America. Aphria has since denied the allegations and has also set up a special committee to review the process in which they acquired these assets, in order to hopefully put to rest any trepidation towards the company moving forward.

Regardless of the review, the news was enough to send Aphria shares down as much as 29% the day the news came out.

Thankfully, despite the fact that these three LPs may not have had as enjoyable a holiday as others, the vast majority of the 134 current producers are finding ways to stay out of trouble, which means more legal cannabis for consumers that need and want the product.

Photo credit: Benjamin Smith