Dimondale-based cannabis company Green Peak Industries which operates under the name Skymint is sinking quickly.
Crain’s Detroit Business reports the company's assets will be auctioned off.
That's after a third-party entity took control over it in March to make sure it’s paying down its debt.
It turns out Skymint was not able to be saved.
After a lender sued the company for more than $127 million in rent and taxes, Skymint fell deeper into debt.
Dustin Walsh is a senior reporter for Crain’s Detroit Business. He covers the state's emerging cannabis industry.
WKAR's Megan Schellong spoke with Walsh to discuss what Skymint's downfall means for the company and its implications for the future of marijuana businesses in Michigan.
Editor's Note: This conversation was recorded before news broke on May 31 that Skymint's assets would be auctioned off.
Interview Highlights
On how Skymint accumulated millions of dollars in debt
Skymint really wanted access to more dispensaries, more places to sell the marijuana that it grows. And so, it tried to buy a cannabis company called 315, which is based out of Ferndale. And so to do that, they had to take on some extra money. And so, they did that, and they basically never paid on their rent and the loan was pretty crazy, you know, high terms, because these guys in the marijuana industry can't go to a bank because it's barred under federal law to get a loan. And so, they're going to investors, and investors quickly realized that it was maybe a bad investment and wanted their money and then filed a lawsuit as Skymint was sort of circling around insolvency.
On what Skymint’s debt and failure to move into the Summit complex says about the state of Michigan’s marijuana industry
The prices [of flower marijuana] sank a lot faster than anyone sort of anticipated. And so they're [the businesses] left, you know, basically not having a very big margin, really struggling to make money while also having these massive debts from these acquisitions and taking control of these buildings, and people are just running out of places to run. And so, it's really hard to make money in this industry right now. And anyone that took on too much too fast is really sort of paying the price.
On what the future of marijuana businesses in the state looks like
The reality is margins are very low. It's going to be very difficult to make money in this industry. So really, it's a sort of traditional capitalist economics of only the strong will survive. And so I think we're gonna see a continued shakeout, we're gonna see a lot more companies go under receivership, we're gonna see maybe some M&A [mergers and acquisitions] deals as some consolidation happens and really, the people that just can't participate or can't keep up with the market are going to go out of business.
Interview Transcript
Megan Schellong: Dimondale-based cannabis company Green Peak Industries which operates under the name Skymint is underwater.
Crain’s Detroit Business reports the company was put under control of a third-party entity in March to make sure it’s paying down its debt.
That's after a lender sued the company for more than $127 million in rent and taxes.
Dustin Walsh is a senior reporter for Crain’s Detroit Business. He covers the state's emerging cannabis industry and joins us now.
Dustin, thanks for being here.
Dustin Walsh: Thanks.
Schellong: How did Skymint accumulate millions of dollars in debt?
Walsh: Sure. So, so basically, you know, in this industry with prices falling, a lot of the larger marijuana companies or larger growers in the state knew they needed to grow and get dispensaries. Dispensaries are actually harder to come by because municipalities are less likely to give a license for a dispensary because, you know, it's a visual thing, right? It's something that people see, and some municipalities do not want that.
So to do that, a lot of these companies are looking to grow fast, to produce in volume. And to do that, they're acquiring these companies. And so, Skymint really wanted access to more dispensaries, more places to sell the marijuana that it grows. And so, it tried to buy a cannabis company called 315, which is based out of Ferndale.
These guys in the marijuana industry can't go to a bank because it's barred under federal law to get a loan. And so, they're going to investors, and investors quickly realized that it was maybe a bad investment and wanted their money and then filed a lawsuit as Skymint was sort of circling around insolvency.
And so to do that, they had to take on some extra money. And so, they did that, and they basically never paid on their rent and the loan was pretty crazy, you know, high terms, because these guys in the marijuana industry can't go to a bank because it's barred under federal law to get a loan. And so, they're going to investors, and investors quickly realized that it was maybe a bad investment and wanted their money and then filed a lawsuit as Skymint was sort of circling around insolvency.
Sschellong: So back in 2021, Skymint had its eyes set on transforming the former Summit Sports and Ice Complex in Windsor Township to expand production. What happened between now and then?
Walsh: Right, so yeah, so they took it on and they quickly had a company come in, there's, it's one of the largest sort of property, cannabis property companies in the world. They operate out of San Diego. They came in and invested a bunch of money into this property, so that Skymint could go in there and start, you know, immediately growing marijuana, become a little more efficient by having distribution out of this large facility.
And it's unclear how far they got in that process before basically the money was gone. They had Innovative Industrial, which is the REIT [Real Estate Investment Trust] company that bought it for Skymint. They invested upwards of $30 million into this property. And it's unclear when it went wrong.
It's unclear if they even got marijuana growing in the facility before sort of things started falling off, and so they sort of ended up in receivership and then all of those properties come into question when a court ordered receiver comes into comes into play.
Somewhere in the next year and a half after taking ownership of that, they basically fell very far behind on rent and couldn't keep it up. And it's unclear if they even got marijuana growing in the facility before sort of things started falling off, and so they sort of ended up in receivership and then all of those properties come into question when a court ordered receiver comes into comes into play.
Schellong: Your report points to allegations of mismanagement of Skymint’s financials by its CEO Jeff Radway. And as of early April, Radway has been on a quote “indefinite leave of absence.” What are the implications of his departure?
Walsh: Yeah, so, so, you know, it's only coming from one side of the lawsuit so we don't know what really went on there. But the people that own 315 cannabis that were sort of part of the investment group to sell 315 to Skymint made some pretty large accusations toward Radway that he was having multiple extramarital affairs with employees and was paying employees off to not report it to HR and to other things and then basically using company funds for that paying off and sort of bribing to keep people quiet. He's had a sort of a checkered history here, at least on one side of the lawsuit.
And then yeah, and in April, he left the company. It's unsure if he was just terminated, or you know, it's hard, it's under a court appointed receiver to have someone in that position anyway. And so, it probably made sense for him to sort of part ways with the company. And it's unclear sort of what you know what ramifications will come to Skymint or if anything will happen to Jeff Radway from a legal standpoint.
Schellong: And what does Skymint’s debt and failure to move into the Summit complex say about the general state of Michigan’s marijuana industry?
Walsh: Yeah, so it's at a really precarious time in the industry. No one expected prices to fall. So, January 2020, which was really the first full month that that marijuana sales were happening in the state of Michigan on the recreational side, not on the medical side, where anyone could go in over the age of 21 and buy cannabis. Prices were $530, upwards to $550 per ounce of flower, marijuana. They quickly sank over the last two years, in January of this year, getting down as low as $80 per ounce. And so really any company that was enjoying just that massive margin in the early days, you know, they all knew it was going to come down, right? It's just a matter of economics, of supply and demand.
And so, they knew the price was going to come down. So a lot of them were like how do we get as big and control as much of the industry as we can as fast as possible? And so you saw a lot of these companies sort of making these big, sweeping, you know, swings at getting more property, getting more grow space, and that's sort of the story of Skymint, is really trying to outrun the prices.
You saw a lot of these companies sort of making these big, sweeping, you know, swings at getting more property, getting more grow space, and that's sort of the story of Skymint, is really trying to outrun the prices.
But the prices sank a lot faster than anyone sort of anticipated. And so they're left, you know, basically not having a very big margin, really struggling to make money while also having these massive debts from these acquisitions and taking control of these buildings, and people are just running out of places to run. And so, it's really hard to make money in this industry right now. And anyone that took on too much too fast is really sort of paying the price.
Schellong: So, businesses are scrambling right now. And you've already alluded to kind of this, not panic reaction, but this scurrying to full launch into production, open more dispensaries. What does the future of the marijuana business in the state look like?
Walsh: Sure. So, we have to remember this is a brand new industry, and a lot of these people are not traditional business people in a lot of senses. Most of them are, especially the larger companies, but not everyone. And again, this is a brand new industry, so we don't know where it's going to go, but prices are starting to rebound just slightly. But the reality is margins are very low. It's going to be very difficult to make money in this industry. So really, it's a sort of traditional capitalist economics of only the strong will survive. And so I think we're gonna see a continued shakeout, we're gonna see a lot more companies go under receivership, we're gonna see maybe some M&A [mergers and acquisitions] deals as some consolidation happens and really, the people that just can't participate or can't keep up with the market are going to go out of business.
These things take years. And so, we're gonna continue to see that, we're gonna continue to see sort of some, the bleeding edge, as we call it of these companies that got in early that are really struggling to make it and whether they can make it.
And so, we're going to sort of see that shakeout and see what happens. We don't know, no industry, no marijuana state, state that allows marijuana has really gone through a long enough period to see where it falls out, you know, you sort of seeing this happen in Colorado and California and Washington state, but they're still in the middle of their shakeout. These things take years. And so, we're gonna continue to see that, we're gonna continue to see sort of some, the bleeding edge, as we call it of these companies that got in early that are really struggling to make it and whether they can make it.
Schellong: That's Dustin Walsh.
He's a senior reporter for Crain’s Detroit Business and covers the state's emerging cannabis industry.
Dustin, thanks.
Walsh: Thank you.
This interview has been edited for clarity and conciseness.