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Cresco Terminates $282.5M Deal For Tryke Assets, Posts Higher Q4 Loss

April 28, 2020 1:03 pm
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Cresco Labs (CSE:CL) (OTC:CRLBF) has canceled a deal to buy Tryke Companies LLC.

The Chicago-based company had agreed to acquire various assets from the vertically integrated seed-to-sale cannabis company. Due to current market conditions, Cresco said Monday that it terminated the acquisition.

Cresco also released its fourth-quarter unaudited financial results.

Tryke Deal Smoked By Regulations, Market Downturn, Coronavirus

The purchase price for the Tryke assets was expected to be around $282.5 million, out of which $55 million was to be paid in cash.

As compensation for canceling the deal, Cresco agreed to pay equity valued at $1.25 million.

“Our acquisition of Tryke has been impacted by regulatory delays, a decline in capital markets and now COVID-19, which brought additional risk to this transaction,” Cresco Labs CEO and co-founder Charlie Bachtell said in a statement.

“Given these events, we feel the resources previously targeted for this transaction are better invested in our existing markets, where we have high visibility and certainty of return on capital.”

Cresco's Financial Results

For the fourth quarter of 2019, the multistate cannabis operator disclosed revenue of $41.4 million, up by 144% from $17 million for the same period in 2018. For the full year 2019, the company generated revenue of $128.5 million, up by 197% from 2018.

Cresco posted an adjusted EBITDA loss of $2.9 million, versus an adjusted EBITDA loss of $300,000 in the corresponding period of the prior year.

The company posted a net loss of $45.2 million versus a net loss of $4.4 million in the fourth quarter of 2018. 

“2019 was a pivotal year for Cresco, as we achieved several major milestones that will have a profound impact on the future success of both our organization and the industry,” Bachtell said. “Throughout the year, we diligently executed the plan laid out for shareholders, delivering strong financial and operational performance and setting the foundation for profitable growth in 2020.

Cresco’s CEO said the company expects to become cash flow positive by the end of the year.

CRLBF Price Action

Cresco shares were down 11.48% at $3.86 at the time of publication Tuesday. 

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Photo courtesy of Cresco Labs

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