NAB’s pot loan is going up in smoke

For the long-suffering shareholders in listed medicinal cannabis player Cann Group, it’s a case of buy high, sell low – assuming the company ever makes it back to the ASX boards.

Once valued at near $530 million off a wave of takeover speculation and in-principle research agreements with universities, Cann’s market capitalisation has sunk back to just $27 million after weathering a series of rolling crises.

ASX-listed Cann Group is suspended from trade. Supplied

There was that time in 2021 it inadvertently paid $3.6 million to scammers in Hong Kong – the funds were meant to go to a contractor doing work at its Mildura precinct, but instead made their way to an “unknown third-party” somewhere along the way. Oh! And the incident that same year when it did not properly disclose to the ASX that a lender had switched their convertible notes for shares, and Cann had to run off to court to help correct the error.

It’s been a rollercoaster for sure and, with Cann’s shares lingering deep in penny stock territory at 6¢ a pop, it looks as if the ride may finally be ending for the company and its board, led by chairman Dr Julian Chick (who came onto the board in 2022) with other notable directors being former Tassal Group chairman Allan McCallum and ex-Nufarm chief Doug Rathbone.

The market operator suspended Cann from trade in March after auditor Ross Burt of William Buck said he could not draw a conclusion either way on if the company was a going concern. The company was dependent on new financing, he said, with the board “unable to provide sufficient appropriate evidence of sufficient committed funding”.

It took Cann three more weeks to update the market on its funding, which revealed National Australia Bank was left holding a $65 million roach. Payments had been deferred until early 2025 as it searched for new funding, the company assured.

CEO Peter Koetsier resigned three days later on March 21 for “family reasons” less than 18 months after taking the job. The board passed the joint to Jenni Pilcher, a former Mesoblast executive, on an interim basis.

The next day, Cann offloaded one of its manufacturing facilities for $1.9 million to buy it some breathing space. Then, on May 7, it proudly announced it had secured a new $5 million facility with a “prominent Australian private credit fund” that is subject to a cool 15 per cent per annum interest rate – onerous terms Cann could only secure by putting a second mortgage over its Mildura property, which NAB already has a security over.

Off to the races again! Cann proudly re-issued its half-year report on May 8 with the auditor now able to draw a conclusion on the accounts. Their conclusion – that a “material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern”....

This understandably did little to persuade the market operator to let Cann stock start trading again, the ASX noting it’ll remain suspended until satisfied the company is compliant with listing rules.

On Friday, Dr Chick finally broke cover. In a letter to shareholders he said that Cann had fired 10 per cent of its staff and had revised its sales strategy.

“Cann now has a clear strategy to becoming a profitable, successful business,” the good doctor argued.

Can we have a puff of what he’s on?