Following on the heels of a <ahem> rather expensive capital raise, 48North ($NRTH) today announced the departures of their CFO and Head Grower….along with 20% of their workforce. And….they’re shutting down outdoor production.

The announcement alludes to their indoor production along with ‘strategic partners’ will be sufficient to supply their biomass needs. Given their sales levels, its’ a move that could’ve should’ve been recognized last summer, and done 2 quarters ago.

Which, is probably why their CFO is also taking a walk.

An entire fiscal year….with $30MM spent on ops for $10MM in revenue….this is not a ‘surprise’ kind of moment. Both the Head Grower and the CFO should have been all over this (moreso the CEO). Plans to use cheap outdoor biomass to use as feedstock were left unrealized (and I’m assuming that was the plan. Coming around to the notion that there’s excess supply of biomass in the Canadian market now…well, that screams of being clueless. Or perhaps unconscious).

The mention of ‘strategic partners’ says ‘we’ll be buying from people who can grow’.

This isn’t an outfit that’s ever really been on my radar, but I mention all of this because their travails mirror several of the other mid-tiers. They’re high centred on a meridian of cost versus scale; they have largely undifferentiated product; advanced products (whether bath bombs or sublingual strips) are lower margin and bring high dev/SKU placement costs…demanding higher volume and strong sales and distribution networks (ie: more cost).

And….. $NRTH also has the challenge problem of not being able to grow desirable product either. At least $FIRE and $WMD has flower that moves.

At any rate, Emerald Health was another outfit I’ve seen sleepwalk through moments where they should have been wide awake. $NRTH’s last raise was the moment they turned into a zombie….but the bite that infected them happened last March and should have been noticed. Contrast 48North’s actions with $FIRE’s decisions last January if you want a great comparison of business cases.

CEO Charles Vennat has been at $NRTH since the summer of 2019, and he’s the one who’s been sleeping through it all. 48North’s cash problems now seemed to have finally woken him up.

Thin gruel for the workforce and 2 executives that are gone. And worse for investors who assumed this company had someone leading it. And now – what’s the plan? ‘We’re going to make ourselves a little smaller and live within our means’.

One can be forgiven for thinking that after having been woken up, all Vennat’s doing is rolling over and going back to sleep again.

The preceding is the opinion of the author, and is in no way intended to be a recommendation to buy or sell any security or derivative. The author holds no position in $NRTH.