It didn’t take long for Gotham Green to take a position on iAnthus’ ($iAN) dallying around interest rate payments.
$iAN’s Interim-CEO Randy Maslow already has plenty of issues in front of him. Pissed off debenture holders for one. Delayed financials another. And now, with the stock under a ‘cease trade order’ (CTO), shareholders probably aren’t enamoured with what the company has (or hasn’t) been doing for the past year or three.
Now, he’s got something more serious to deal with.
Gotham Green (GG) executed a massive funding agreement last fall with $iAN, one that was promised to bridge the company to a viable operating state. Gotham said at the time that operational strides and activities by $iAN were not ‘reflected in the Company’s current trading price’. So, being business people, GG gave $iAN money. In return, they got a 13% interest rate, sign off on additional lending by other outfits, proportionate ownership guarantees, and naturally, secured the debt with $iAN’s assets.
Now, GG has pulled the pin, and dropped a Demand Letter on Maslow’s desk. It also came with a “Notice of Intention to Enforce Security”, which simply means if the ‘demand’ (which is full repayment of the debt, immediately) isn’t made whole by $iAN, GG will come and literally take their property. Since the collateral is held by GG (at least on paper), it shouldn’t be too much bother for them. Grab a sheriff, change the locks, good to go. Stores might not close, even for a day.
$iAN’s executive has 10 days to figure out where to come up wth several tens of millions of dollars, or, end up on the street.
I’ve seen some folks muse that this was previous CEO Hadley Ford’s game the whole time. Or that it was GG’s. Or whoever. Perhaps. If there was some unstated intent, I’d be inclined to think it was GG pulling a vulture fund manoeuvre and locking down what they wanted as contingency on the loan.
What I’ve also seen is how retail sorts are reacting in social media to the CTO and these notices. Comments like ‘does this mean it won’t go back up’; or ‘does this mean there’s still a chance’? Others remain hopeful, but lament the fact that $iAN hasn’t found another source of funds…. because ‘some of their assets are bound to pop’‘. These people find solace that….in the least…there has been ‘several expressions of interest‘ from other lenders…..that could give $iAN enough money to keep the house.
Unless $iAN pulls an extraordinarily large cash rabbit out of an extremely tiny financial hat, this thing is going to be cut up like a steak. As management is hiding out in the company bunker – now coming up on their 4th month of evaluating ‘strategic alternatives’ – the odds don’t look good. I suspect if there is interest from other MSO’s, it’ll be a piecemeal approach to specific assets. As to finding another lender, the question becomes: what would the new lender get that GG couldn’t? As it is, GG has filed notice to seize collateral. And that doesn’t mean the office supply room at Headquarters.
That means bricks and mortar dispensaries, cultivation sites, leases, equipment, and whatever else was pledged. Which means the end of $iAN as we know it.
I’m going to miss some of the industry that’s ran aground. I think specifically here about Nathan Woodworth over at $JWC. As sincere and earnest an individual one could ever hope to meet. His lack of business acumen – particularly around distribution – was his likely downfall.
In the case of iAnthus, a couple of ex-bankers looking for a play stepped into the sector, and demonstrated they couldn’t run a lemonade stand. Given the serious and sustained operational shortcomings of the company, one could be forgiven for suspecting that Hadley and Co. had ever intended to do even that.
I’m not going to miss iAnthus. Neither will the sector. Here’s to hoping that this (and other chaff) will blow away sooner than later. There’s a 10 day notice period before GG comes in and takes their property….which means we won’t even have to wait for the (twice delayed) financials.
That $iAN’s under a CTO is the ultimate insult to shareholders…..a group of folks who’ve suffered for far too long as it is.
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