StateHouse files for bankruptcy in Canada, officially enters US receivership
StateHouse Holdings (CSE: STHZ) (OTCQB: STHZF) filed for bankruptcy in Canada and began receivership in the United States, the company announced this week.
The vertically integrated cannabis firm, which operates 11 dispensaries across California, made the filing under Canada’s Bankruptcy and Insolvency Act. The move follows the launch of receivership proceedings in the U.S. by one of its primary lenders, Pelorus Fund REIT.
According to a company statement, the decision came after “careful consideration of the current financial condition of the company and its subsidiaries, the company’s inability to pay their liabilities as they become due.”
Trading of StateHouse shares was halted, and the company expects its listing to be suspended – and ultimately delisted – as the bankruptcy process unfolds.
The financial troubles surfaced publicly last month when Pelorus filed a complaint in San Diego Superior Court seeking to place StateHouse and its subsidiaries into receivership. According to Pelorus, Statehouse had already defaulted on four existing loans.
StateHouse’s roots date back to 2006, when it was a pioneer in the legal cannabis space. Its predecessor, Harborside, was among the first six entities granted medical cannabis licenses in the United States.
On Wednesday, StateHouse and its lenders officially agreed to appoint a receiver to maintain the company’s California operations, according to the company.
Last month’s receivership complaint “combined with today’s filing, protects StateHouse employees, customers, business partners and vendors and preserves the company’s ongoing operations in the state of California, enabling it to operate as normal across its production and distribution footprint in the state,” Pelorus said in a statement Friday.
The lender added that it recognizes “the significant value of StateHouse’s business, employees and operations,” and looks forward to working with the company and the court-appointed receiver to ensure StateHouse is “well positioned with a cleaner, more efficient and appropriate structure moving forward.”
StateHouse said it will provide updates on the receivership proceedings and California operations “in due course.” It operates an integrated cultivation facility in Salinas and manufacturing in Greenfield, in addition to its retail locations.
The company’s portfolio includes several popular cannabis brands sold across California, including Kingpen, Dime Bag and Smokiez.
Harborside’s founders traced the roots of StateHouse’s financial troubles to a series of acquisitions following a change in management. According to Green Market Report, the company’s founders, Steve and Andrew DeAngelo, were forced out in 2020 in what they described as a hostile takeover. The new management embarked on an aggressive expansion strategy, acquiring three companies in less than a year.
Steve DeAngelo told GMR, “If we had remained in positions of influence at Harborside, we never would’ve allowed this ridiculous rollup strategy to be executed. It was the wrong move in California.”
The DeAngelo brothers haven’t ruled out the possibility of repurchasing the company.
“There’s nothing in the world that would make us happier than to be able to bring that baby back to life again,” Steve DeAngelo said.
According to analysis by Viridian Capital Advisors, StateHouse has total debt of $122.79 million and tangible assets valued at $123.47 million. In a liquidation scenario, creditors might recover up to 80 cents on every dollar owed.
As of the latest filing, the company hasn’t announced any immediate changes to its day-to-day operations or employee status.
StateHouse joins a growing list of once-prominent cannabis companies, including Herbl, Skymint and MedMen, that have had to pursue receiverships amid headwinds in the space.
