Canopy Growth’s (CA:WEED, US:CGC) latest financial results suggest the once-dominant Canadian cannabis company is on the verge of becoming a permanent financial wreck.

The company, based in Smiths Falls in eastern Ontario, reported its Q4 and fiscal 2023 results on June 22. The numbers were not good.

Its top-line net revenue was $402.9 million in fiscal 2023, 21% less than a year ago. The only bright spot in 2023 was its Canadian medical cannabis business, which grew revenues by 6% year-over-year to $55.8 million.

Canopy lost $604.7 million from its operations in the fourth quarter and $2.85 billion for fiscal 2023. The annual operating loss was nearly a three-fold increase from 2022.

However, the losses reminded investors why Canadian cannabis, and Canopy in particular, remains such a train wreck.

Over the last six months, WEED stock is down more than 78%, two times the decline in the price of the Global X Cannabis ETF (US:POTX) in that same period. Canopy stock is the third-largest holding, at 9.15%, among the 16 stocks in the exchange-traded fund’s portfolio.

The Canadian Cannabis LP Index is down almost 12% in the last six months.That equal-weighted gauge consists of companies licensed by Health Canada to cultivate, process or sell cannabis.

Are Best Days Ahead?

Canopy’s earnings release suggests the company believes its best days are ahead.

“Fiscal 2023 was a transformational year for Canopy Growth as we began to implement a comprehensive strategy to accelerate our path to profitability, and position our business to realize the tremendous opportunities ahead. Our actions are already yielding results and we expect to realize significant benefits from our cost reduction program in Fiscal 2024,” stated CEO David Klein.

Any time the term “transformational year” is used in a company statement, investors should look closer.

“Paired with continued progress in our Canopy USA strategy which enables a fast start, the Company is well positioned as it strives towards its goal of long-term North American cannabis leadership.”

Investors have their doubts, as they should. The WEED stock price in the past month fell below $1 per share for the time since it was founded in 2013.

Not only is there a possibility that Canopy won’t be able to carry on its business activities due to a shortage of funding — the company had net debt of $524 million at the end of March and burned through nearly $558 million in cash in 2023 — but it will likely have to execute a reverse split to get the share price back above $1 at some point in the second half of the year or into 2024.

BioSteel Made Money for Athletes But Not Canopy

Virtually every part of its business is imploding.

That includes BioSteel, the energy drink brand Canopy paid $51 million for in October 2019 to acquire 72% majority control. While the brand’s revenue increased by 101% in 2023, to $69.6 million, from $34.6 million a year earlier, the growth came at quite a price.

Its gross margin in the past year was minus 58%. That is, for every dollar of sales, it spent $1.58 to make the product.

In May, Canopy revealed that a review of BioSteel’s 2022 sales found several “material misstatements” and accounting errors for that year’s first through third quarters. The financial statements were restated, reducing BioSteel’s 2022 revenues by $10.0 million and $13.8 million in 2023.

Canopy has taken steps to control BioSteel’s business more closely, including firing several of BioSteel’s management team members, and the entire matter could end up in court. It could be too late.

Impairments Top Billions

Canopy has become one big impairment and restructuring machine. In the just completed 2023, it had $2.26 billion in asset impairments and restructuring costs. In 2022, they were $369.3 million,  $534.4 million in 2021, and $623.3 million in 2020.

That’s $3.8 billion over the past four years. It’s a wonder its assets have any value left on the balance sheet.

Someone will benefit from Canopy’s imminent demise. Who that will be is anyone’s guess.

Turn out the lights; the party’s over for Canopy Growth.

This article originally appeared on Fintel

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