Adam JacksonCanadian cannabis company SNDL Inc. (NASDAQ: SNDL) said Wednesday its affiliate, SunStream USA, will proceed with the acquisition of equity stakes in U.S. multistate operators Parallel and Skymint, even as legal battles remain over the targeted acquisitions.
SNDL said its plans received a regulatory green light, with Nasdaq finding the SunStream USA structure conforms with applicable laws after an “active dialogue.” The firm said SunStream USA plans to restructure nonperforming credit investments to take majority positions in the two cannabis firms.
However, the deals are still subject to closing conditions, and the company cannot fully consolidate SunStream’s financials until federal legalization occurs, management said.
“This initiative creates attractive optionality for SNDL upon federal legalization to deploy additional investment capital into the SunStream USA Group structure, improving the return potential of attractive U.S. cannabis assets in growing markets,” SNDL’s CEO Zach George said in a statement.
Ongoing litigation
The move involving Michigan-based Skymint hasn’t been a straight path, with ongoing litigation brought by another operator, 3Fifteen Cannabis, challenging the ethics behind it all. 3Fifteen previously agreed to be acquired by Skymint for $78 million in 2021, but that deal fell apart last year as Skymint faced financial troubles and a receivership process.
3Fifteen and investor Merida Capital appealed a 2022 court ruling that denied their attempt to terminate the acquisition and have 3Fifteen’s assets returned to them. They claim Skymint never fully paid for the deal before its cash flows became strained.
In December, a judge temporarily froze Skymint’s receivership as 3Fifteen’s appeal plays out. Merida alleges SNDL’s lending partner SunStream aimed to improperly take over 3Fifteen’s assets through the Skymint receivership.
“The receivership is stayed as of now,” Merida told Green Market Report on Thursday.
SNDL and SunStream are also in the throes of a lawsuit from a Parallel investor who made similar claims about a playbook to take control of the Florida-based multistate operator, which has a footprint in Nevada, Massachusetts, and Texas as well, via receivership after loading it with unsustainable debt.
SNDL estimates the Parallel and Skymint assets would make SunStream USA a top 10 multistate operator based on 2024 revenue, with more than 60 million consumers reached across five states and $5 billion in aggregate market sales.
SNDL’s investment portfolio has exposure to five cannabis properties, including Jushi Holdings, Skymint Brands, Ascend Wellness Holdings, Surterra Holdings (Parallel), and The Cannabist Co.
SNDL did not immediately respond to a request for comment.
