Tropics and Skymint management cooperated in the filing, meaning Skymint agreed to the receiver without contention.
Michigan’s marijuana industry has suffered an epic price collapse due to product oversupply — recreational marijuana retail prices have plummeted from $512.05 per ounce of flower in January 2020 to just $80.16 per ounce of flower in January this year — effectively eliminating margins for many businesses.
Skymint’s troubles originate from its work to stay ahead of falling prices with an aggressive growth strategy.
Both Tropics and Merida lent Skymint funds towards the April 2022 acquisition of Birmingham-based competitor 3Fifteen Cannabis and its 12 dispensaries in Detroit, Grand Rapids, Ann Arbor, Flint and elsewhere.
The wheels at Skymint were already falling off. The company allegedly violated its lending agreement by not raising additional funds, falling behind on taxes and rent. Tropics continually floated the company more funds to stabilize operations, but those efforts appeared to have failed.
Skymint owed nearly $4 million in sales and excise taxes by March 25, the suit alleges, and the landlord of its leased cultivation facility in Dimondale, near Lansing, is attempting to evict the company for owing roughly $1.1 million in rent, according to court documents.
By providing working capital under receivership, SunStream is maintaining its interest in hopes the operations are either corrected to create strong returns or for a payout in the event of a sale.
“The receivership process is designed to facilitate a path to profitability or complete a sale or restructuring transaction,” SunStream said in the press release. “SunStream will retain its senior lien position during the receivership process and, in the event of a sale transaction, will be entitled to receive the proceeds of its collateral or to credit bid its secured claim to become the new capital and operating sponsor of a restructured Skymint business.”
Skymint appears to have no interested parties in acquiring its assets in its current form.
Michael Elias, founder and CEO of Skymint competitor Marshall-based Common Citizen, said he’s examined buying up its assets, but the debt obligations attached are too high.
“Debt is too significant and restructuring too difficult to extract any value,” Elias told Crain’s. “I’m sure someone could do it, but it’s too cumbersome today (under falling prices).”
Skymint is, at least currently, the largest marijuana business failure since recreational marijuana sales began in December 2019.
However, at least four other marijuana businesses are under receivership, according to data from the Michigan Cannabis Regulatory Agency — Uldaman Inc., which does business as dispensary Green Planet Patient Collection in Ann Arbor; Rehbel Industries, a grow operation in Lansing; Huron View LLC, doing business as Huron View Provisioning Center in Ann Arbor; and Bay Shore Development Group, a grow operation in Bay City.
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