Shares of Canopy Growth surged after the company announced its separation from its BioSteel sports nutrition unit.
Canopy Growth’s shares experienced a 10% jump on Nasdaq, reaching $1.28 in early trading. This narrowed the year-to-date fall to 46%. In Toronto, the shares were up 5.8% at C$1.65, reducing the year-to-date fall to 47%.
The cannabis company stated its intention to file for bankruptcy protection for BioSteel and immediately stop funding the business. This decision eliminates a significant source of cash burn for Canopy Growth. As a senior secured lender to BioSteel, Canopy Growth anticipates recovering proceeds from an upcoming sale process for the unit.
For some time, the company has been exploring strategic options for BioSteel, including a possible sale. This move comes as Canopy Growth aims to refocus as an “asset light” cannabis operation.
Canopy Growth reaffirmed its goal of achieving positive adjusted earnings before interest, tax, depreciation, and amortization across all remaining business units by the end of fiscal 2024.
According to a regulatory filing in the United States, Canopy Growth expects charges related to BioSteel and the elimination of 181 jobs. Most of these charges will be booked in the third and fourth quarters of the fiscal year through March 31. However, it also estimates annual cost savings of over C$100 million. As part of the creditor process for BioSteel in Canada, the company projects an asset impairment charge of between C$100 million and C$130 million in the second quarter of fiscal 2024.