Though the stock market has been rallying this week on hopes that we are seeing some light at the end of the tunnel regarding the COVID-19 crisis, significant damage has already been done to most sectors, including cannabis.
Cannabis company OrganiGram (OGI) was hit hard during this recent market sell-off, falling from highs of around $3 to a low of under $2.
The company just announced some recent layoffs that continue to showcase the effect of the COVID-19 crisis on the cannabis sector. OGI has announced that it laid off 45% of its workforce, which equates to roughly 400 employees, throughout all areas of its operations. The layoffs began about two weeks ago on March 24 and consist primarily of voluntary layoffs.
The company offered voluntary layoffs to certain departments due to the ongoing pandemic, while some segments of the business were considered non-essential.
OrganiGram has stated that they will continue to monitor the situation in an attempt to be proactive. This most recent announcement follows a previous statement that a “material amount” of employees would be laid off.
OGI’s CEO Greg Engel said, “These are unprecedented and trying times. Our priority right now is to make sound strategic decisions that are in the best interests of our people and which will contribute to the long-term sustainability of the Company.”
OGI will be making lump-sum payments to the affected individuals to help get them through these tough times until government funding comes through for them. The company will also support employee health benefits for all of its workers.
Due to the COVID-19 crisis affecting their workforce, OGI has stated that they will be faced with reduced cultivation, harvest, production and packaging operations. The company plans to use their in house inventory to get them through this challenging environment until production and cultivation return to normal.
Guidance, however, will be affected, more specifically regarding the launch of new powdered beverages and Ankr Organics, as it’s unclear how long these products will be delayed.
Despite the tough economic times for the cannabis sector we still like OGI compared to its peers. The company has a lean profitable business model and a healthy balance sheet. The company may not have billions of dollars worth of cash on their books, but they also don’t have the operating expenses like many of its peers.
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OGI shares were trading at $1.77 per share on Tuesday afternoon, up $0.06 (+3.51%). Year-to-date, OGI has declined -27.76%, versus a -15.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaron Missere
Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles. More...
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