Plus Products Seeks Protection from Creditors
California-based edibles manufacturer Plus Products, Inc. (PLPRF) has recently secured court protection from creditors.
Using the Companies’ Creditors Arrangement Act (CCAA), Plus Products aims to restructure its business and financial processes. What might that mean for this cannabis stock moving forward?
What Is the Companies’ Creditors Arrangement Act (CCAA)?
The CCAA is a federal act enacted by the Parliament of Canada allowing corporations to restructure their affairs if they are struggling financially. This helps companies avoid bankruptcy and allows creditors to receive payment that the company owes.
Though Plus Products markets their products in California, they were founded and backed by a fund based in Canada, which is how the company’s board of directors has been able to take advantage of the CCAA.
Plus Products and the Initial Order
On September 13 of 2021, the Supreme Court of British Columbia heard Plus Product’s application under the CCAA.
According to the Initial Order, Plus Products is entitled to a stay of proceedings in favor of the company for an initial period of 10 days. This period is subject to court-ordered extensions.
The CCAA proceedings will be officially monitored by PricewaterhouseCoopers, Inc., as stipulated by the court.
Plus Products Moving Forward
Though the Annual General Meeting was originally scheduled for September 14, Plus Products canceled the meeting in light of the CCAA proceedings. Moving forward, the CCAA’s initial order will allow Plus Products to do two crucial things.
First, the company will continue to conduct normal business operations and pay its ordinary expenses. Second, the company can work toward completing the Board of Directors’ review of strategic alternatives.
These alternatives include the further development of transaction practices that will either complement or replace arrangements made through the CCAA.
This means that the company vows to continue providing quality products and first-rate customer service. However, as Jake Heimark, co-founder and Chief Executive Officer notes, “the structure of the California market and the slow rollout of legal dispensary licenses…have made it difficult for independent brands to remain competitive in this state.”
Comeback Hearing and the Future of Investing
Heimark and the company’s executive team remain confident that these proceedings will ultimately work to the benefit of the company and its investors.
To that end, trading has been halted on common shares and the Canadian Securities Exchange until the delisting of the Subordinate Voting Shares and the Company’s securities from the CSE.
There will be a comeback hearing scheduled within 10 days of the initial order, though this hearing has not yet been scheduled. Interest parties may bring a motion to this hearing but must provide notice to Plus Products.
These developments naturally give cannabis investors pause, but the future of Plus Products ultimately depends on their ability to rebound after this setback. It’s possible that the CCAA will allow the company to recover and return to full operational capacity, which may allow investors another chance to get in on the ground floor.