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The board chair of Tilt Holdings Inc. is stepping down, capping off a tumultuous six weeks for the cannabis company that included writing off nearly US$500-million worth of assets and naming a new chief executive.
As of Thursday, Alex Coleman no longer sits on Tilt’s board of directors, the company announced at its annual general meeting. The news was unexpected, considering Mr. Coleman was formally nominated to serve as chair in Tilt’s proxy circular four weeks ago.
The development also marks a dramatic exit for Mr. Coleman, who held the dual role of chief executive and chairman as recently as early May. He no longer has any leadership or governance role at all.
Tilt’s troubles emerged on May 1 when the company reported a goodwill writedown worth nearly a half-billion U.S. dollars as part of its fourth quarter earnings. In the aftermath, Mr. Coleman, then CEO, blamed Tilt’s auditor for the impairment. Shortly after, Tilt named a new interim CEO, Mark Scatterday, and announced that Mr. Coleman would serve solely as board chair.
Three weeks later, Tilt disclosed that it paid senior executives and board members US$60-million during the first quarter, mostly in stock options. The compensation stemmed from options that were awarded when Tilt was formed through a four-way merger in late 2018.
Massachusetts-based Tilt went public in December through a reverse takeover of Canada’s Sante Veritas Holdings Inc., which traded on the Canadian Securities Exchange. The company simultaneously bulked up by acquiring three other U.S. businesses – Baker Technologies LLC, Briteside Holdings LLC and Sea Hunter Therapeutics LLC – with the goal of building a vertically integrated business that ranges from cannabis production to retail software for dispensaries to consulting services.
Tilt remains listed on the CSE and is one of many companies marketed to Canadians as a means of capitalizing on the potential of cannabis use being legalized in the United States.
The recent writedown and compensation expense, however, have spooked some investors, many of whom had bought in via a private financing round in November. The share sale, led by Canaccord Genuity, was priced at $5.25. On Thursday, Tilt closed at $1.21 a share.
Facing investor backlash, Tilt’s interim CEO Mr. Scatterday released a public letter last week that answered the six most common questions he was fielding. On the same day, Tilt also announced a new lockup agreement that prevented six corporate insiders from selling their securities for preset periods, the longest of which was one year.
One week later, Mr. Coleman is now also gone from the company and interim CEO Mr. Scatterday is assuming the role of board chair.
“We take seriously the feedback we received from our shareholders and look forward to a continued dialogue moving forward," Tilt said in a statement. The company declined to comment for this story.
Aside from its governance, Tilt is also facing operational headwinds. After adjusting for one-time items, the company reported an operating loss worth US$8-million in the first quarter and has experienced operating losses and negative operating cash flows since inception.
At the end of the first quarter, Tilt had US$12-million in cash left in the bank. On April 29, the company secured a US$20-million credit facility that charges an effective interest rate of 18.75 per cent.
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