Medipharm Labs: Activist Investing Enters Cannabis
A little over a year ago, I penned an article on why MSOs and LPs should fear the arrival of Activist Investing (you can find it in the archive)
AI has a mixed reputation; your perspective depends on experience, AI knowledge and the business situation.
Every cannabis firm has underperformed from a share price and return on capital perspective.
There is little hope most of this cratered value will come back.
Cannabis has mostly been shielded from AI due to stigma and its lack of institutional capital. The latter are often the instigators for AI campaigns.
I am revisiting this subject because of the recent public battle for Board control of MediPharm Labs
Founded in 2015, ML is a publicly listed Canadian LP of extracted products. The stock is way down from its peak. The Company has pursued many different strategies. From what I know, they have some solid assets, capabilities and people.
ML’s story is not unique in North American cannabis nor are they uniquely deserving of being targeted by AI. However, every pubco faces this risk including stalwarts like Walt Disney, P&G and Salesforce.
In any business, what matters at the end of the day is returns for shareholders. In cannabis these happen to be mostly long-suffering retail investors.
Enter Regan McGee and Apollo Capital. They are a Toronto based company "that seems to have their hands in a lot of things around the world."
Here is Regan’s take on why ML is ripe for an AI campaign.
➡️ “Management is being paid at 500% above peers.
➡️ The stock is down 99% with no plan from ML to increase the share price.
➡️ ML has been selling assets for years to keep burning money.
➡️ An angry shareholder base feels mistreated by insiders.
➡️ There is solid upside potential if the right turnaround people are allowed to grow it.”
Of course, there are two sides to the story. Management is fighting back and have a web page outlining their position right here:
https://medipharmlabsagm.com/#
The future of the Company will be settled on June 16, 2025 at the Annual and Special Meeting of Shareholders.
I don’t know enough to vote yay or nay plus I don’t have a dog in the fight i.e. I don’t own stock of either firm.
You can defend yourself against AI targeting with good governance and shared interests. Consider executive pay.
TerrAscend Chairman, Jason Wild, takes zero cash compensation. His RSUs and options are way under the water - and he never sold any to cover taxes. Effectively Jason has been paying to work for the Company.
Net, the threat of AI actions are important in keeping cannabis management & Boards in check and retail investor’s protected.
Regardless of the outcome, this won’t be the last AI incursion into cannabis. There are lots of candidates and conditions are only getting worse.
#governance #executive compensation #activistinvesting #MSOS #LPS #shareholders #ApolloCapital #ReganMcGee #JasonWild #Terrascend