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iAnthus drops a handkerchief

Originally published June 11, 2020

iAnthus’ ($iAN) shareholders got an update on the company’s missed interest payments on debentures.

If you’ve been following $iAN, back in early April, they announced that they wouldn’t be making interest payments on $160MM of debentures. According to the company, they didn’t have the liquidity (yep) to satiate the interest payments and keep operating. They’d been trying to raise cash since last December, but have come up dry. They blamed the current capital environment in the cannabis sector (along with COVID), and CEO at-the-time Hadley Ford stated: “It was a difficult decision to not make the interest payment when it was due, but management and the board decided it was in the best interest of the Company and our stakeholders to spend our cash to maintain the inherent value of our business operations…. Our business has never been stronger, and iAnthus is on track to achieve positive adjusted EBITDA and operational cash flow in 2020 as previously planned.””

Ok. Cue debenture holder outrage. Around the same time, some <ahem> details surfaced about conduct and ethics at iAnthus, and just as fast, CEO Hadley Ford became ex-CEO.

Fast forward to the end of April, and $iAN took advantage of COVID relief offered by exchanges to delay filing their financial statements.

At the end of May, everything was supposedly on track. Financials would be published on June 15th and July 14th respectively, and hang in there, an update would be coming soon.

And so today, the update came. No, said iAnthus, they won’t be publishing the annual nor interim statements on time, and no, they won’t be paying the next tranche of debenture interest (due June 30th), and just to let everyone know, they expect a ‘Cease Trade Order’ to be issued by the exchange for the delay.

Aside from them not having a year end nor interims out by now, I see nothing in these actions but contempt for shareholders, debt-holders, and the exchange. They haven’t been able to find any cash for more than 6 months now, and said nothing for 6 days after flaking on the March interest payments. They’re not doing the interest payment thing again (natch), but now they have the gall to say they can’t/won’t provide financial statements.

One of the debenture holders had had enough the other day (June 3rd), filing a complaint with the US District Court in NY about the lack of interest payments and filings. According to iAnthus, they dispute the allegations, and will defend themselves vigorously. From the timing, it looks like they pulled the same stunt as last time, putting out a press release of their default several days after it occurred.

The sordid episode detailed above is what happens when management realizes – in technical terms – ‘they’re fucked’.

I don’t know whats to become of $iAnthus. Whether they find a Hail Mary investor or lender, whether they can sell the assets they have, or god forbid, actually make a business out of the thing. It’s a guess at this point.

What I do know is that there’s going to be more scenarios like this one. Best to get in front of it before it gets to this point, and look for signs of this in other companies either in or entering distress. That management that you now love so dearly in one of your holdings can turn on you like a viper. Not only will they stop answering the phone, but they’ll run to a safe room and hunker in.

If it gets to that point – in technical terms – ‘you’re fucked’.

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 $iAN