Bad Weed A Big Problem For Wall Street’s Latest Billion-Dollar Cannabis Company

Mold and rubber bits found in a big batch — half a ton — of buds from Sundial Growers Inc.

Corporate cannabis purchaser Zenabis Global Inc. had to return half a ton of marijuana purchased from Sundial Growers Inc. after finding mold, pieces of rubber gloves, and a variety of other materials with the product.

The sale would have been equal to 10 percent of Sundial’s total second-quarter marijuana sales (five metric tons). With this in mind, the half-ton of cannabis would be valued at around $1.9 million.

According to people familiar with the matter, Zenabis made the return because of the poor quality of the bud and the non-plant material found throughout the product, along with some other problems.

This is not something that would be expected from a company (Sundial) that raised $143 million and went public on the Nasdaq so recently. But with the company valued at around $1 billion, there is some sketchiness regarding the valuation. According to an investor who listened to the company’s pitch, Sundial failed to mention that it had a half-ton return when it attended a roadshow presentation in Toronto. The company’s quarterly earnings filing with the Securities and Exchange Commission and IPO filing shows that it had $3.3 million in penalties as a result of failing to deliver on its cannabis delivery promises throughout 2018.

According to Sundial’s IPO documents, most of its sales are coming from other licensed producers located in Canada. While this is currently the case, the company wants to decrease the percentage of business it receives from potential rivals throughout 2019, choosing to focus on competing in the “premium” cannabis niche.

How do you feel about Sundial’s shortcomings? Would you trust this company to deliver premium cannabis, despite its apparent failures to provide product meeting minimal quality standards?

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