CULTIVATED: Layoffs hit Canndescent, KPMG rakes in millions from cannabis companies, and more.

Chemdawg marijuana plants grow at a facility in Smiths Falls, Ontario, Canada October 29, 2019.

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Chemdawg marijuana plants grow at a facility in Smiths Falls, Ontario, Canada October 29, 2019.
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REUTERS/Blair Gable

Welcome to Cultivated, our weekly newsletter where we’re bringing you an inside look at the deals, trends, and personalities driving the multibillion-dollar global cannabis boom. Sign up here to get it in your inbox every week.

Happy Friday everyone,

My week was sadly dominated by the influx of tips I had coming in around layoffs in the cannabis industry. These stories are never easy to cover – you have to remember there are real people on the other end of the line, who depend on these jobs to support themselves and their families.

There is clearly a consequence to the “green rush” mentality that gripped investors and entrepreneurs in the cannabis space. We’re telling that story as best we can – and if you have a tip, please get in touch. We can talk about source anonymity, it’s something we take very seriously.

And with that, let’s get to it:

On the policy front, all eyes were on a certain committee hearing on Capitol Hill. Not impeachment – though yes, I imagine just a few people watched that – but a separate hearing the House Judiciary Committee held on Wednesday regarding the MORE Act, a far-reaching cannabis legalization bill.

The bill, which would remove cannabis from the Controlled Substances Act, effectively legalizing the drug, is the most comprehensive cannabis bill ever debated in Congress. While it passed the committee 24-10, its prospects in the Republican-controlled Senate are dim at best.

Some industry experts say the hearing was held as a way to shore up support for more limited cannabis legislation, including the SAFE Banking Act and the STATES Act, which would protect banks that want to work with cannabis companies and states that want to create recreational cannabis markets respectively.

My colleagues at Markets Insider have the breakdown on what the hearing meant for cannabis stocks, which gained on the news.

And last, a slew of US cannabis companies including Green Thumb Industries and Curaleaf, or MSOs in industry parlance, reported earnings this week. They were much more positive than the big Canadian companies that reported last week.

I also wanted to shoutout a fun video my colleague Joe Avella in BI’s LA office put together, visiting Lowell Farms, the world’s first cannabis cafe. Joe really, really enjoyed that cheeseburger.

If you want a discount to BI Prime to read my stories, sign up here!

-Jeremy

Here’s what we wrote about this week:

We got the internal memo that reveals why hot California cannabis startup Canndescent quietly laid off 16 workers just days before closing a big funding round

More layoffs are hitting the cannabis industry. The California cannabis company Canndescent laid off 16 employees on September 5, according to a memo obtained by Business Insider.

“We are now well into the year and believe it’s important to make immediate changes to our operating plan in order to drive growth and control costs,” the company’s chief people officer, Kerry Arnold, wrote in the memo. You can read the full memo here.

The company closed a $27.5 million funding round five days later that valued the company at over $200 million, Business Insider reported at the time.

Accountants are making millions from the Canadian cannabis industry, and KPMG is leading the pack. Here’s how much each of the top firms is raking in.

The largest accounting firms are making millions off the Canadian cannabis industry.

While accounting firms are often seen as staid, conservative institutions, they’re finding the burgeoning industry to be a rapidly growing source of profit. KPMG is leading the pack, pulling in $9.3 million in fees from publicly traded Canadian cannabis cultivators, according to data provided to Business Insider.

The complexities around the cannabis space – namely, rapidly changing laws, volatile stock prices, and the difficulties in valuing a plant that until recently has never been grown legally – mean that it’s a lucrative business for auditors, Michael J. Armstrong, an associate professor at Brock University’s Goodman School of Business and an expert on the Canadian cannabis industry, told Business Insider in an interview.

Cannabis companies have slashed over 1,000 jobs in recent weeks as the industry contends with a ‘toxic’ landscape. We’re keeping track of all the cuts here.

Cannabis companies have been hit with a wave of layoffs in recent weeks, amounting to over 1,000 jobs across both startups and public companies.

The layoffs come amid a broader downturn in the sector. One index of marijuana stocks lost over 50% of its value since its high in January 2018.

We’re continuing to keep track of those cuts here.

Capital raises, M&A activity, partnerships, and launches

  • US cannabis company Acreage Holdings announced an agreement to acquire the Compassionate Care Foundation, a New Jersey nonprofit cannabis corporation.
  • The CBD Capital Group acquired its second portfolio company, Mana Artisan Botanics.
  • Hemp and CBD company Freedom Leaf closed a $5 million convertible note led by an affiliate of Merida Capital.
  • CBD company HeavenlyRx announced an agreement to execute a reverse takeover Therapix Biosciences, a NASDAQ-listed pharma company. The combined company will be named HeavenlyRx and trade on the NASDAQ, and will be led by Paul Norman, the former CEO of The Kellogg Co.
  • Terrace Global, a cannabis company launched late last year, commenced trading on the TSX Venture Exchange on Monday.
  • And another psychedelic deal: Graph Blockchain Inc has signed a letter of intent to acquire Shroom Street Limited for $1 million (CAD). Shroom Street is a “psychedelic” e-commerce and media company.

Executive moves

  • MJardin Group, based in Denver and Toronto, names Patrick Witcher as CEO. Witcher was previously COO.
  • Vape company GoFire names Joe Hodas as CEO. He’ll take over from Peter Calfee, the company’s co-founder. Calfee will remain on as chairman of the board.
  • Aurora Cannabis has promoted Dr. Shane Morris, formerly an SVP of product development to chief product officer, and André Jérôme, formerly SVP of business integrations, has been promoted to chief integration officer.
  • TerrAscend Corp appointed Jason Ackerman to its board of directors as executive chairman, where he will oversee the company’s New York office. Ackerman previously founded and served as CEO of FreshDirect.
  • Treehouse Global Ventures, a women-led cannabis investment firm, names Jessica Billingsley, the CEO of Akerna and Michelle Bodner, the COO of Curaleaf to its advisory board.

Stories from around the web

Did I miss anything? Have a tip? Just want to chat? Send me a note at jberke@businessinsider.com or find me on twitter @jfberke.