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There are other signs of strain, even in relatively healthy companies.

Cronos Group Inc., which is well capitalized thanks to a large investment by tobacco giant Altria Group Inc., delayed the release of its fourth-quarter results and restated its financials for the previous three quarters because of issues with the way it reported certain bulk resin purchases. The company’s weak revenue in the quarter — just US$7.3 million — prompted at least three analysts to downgrade the stock.

Hexo Corp. missed its quarterly filing deadline and, when it did report, announced $266 million of writedowns and impairment charges. Revised debt covenants require it to raise $40 million in equity by April 30, a “startling sum” that “could mean severe downward pressure” on the stock, according to CIBC analyst John Zamparo. If it can’t secure that financing, that “would put its going concern status at risk,” said BMO’s Tamy Chen.

Although cannabis sales jumped as self-isolation orders took effect last month, providing a rare respite for the struggling industry, there are already signs the initial spike is starting to wane.

After a notable increase in mid-March, “sales velocity meaningfully decelerated” on the Ontario Cannabis Store website last weekend, “suggesting that this recent surge may be transitory unless COVID-19 quarantine measures are meaningfully extended,” Chen said in a note. “We believe the COVID-19 fallout presents incremental downside for industry sales over the balance of this year.”

Bloomberg.com