Turning Around a Cannabis Business: When and How to Restructure in 2025

The cannabis industry has matured rapidly over the past decade, transitioning from a period of rapid expansion and high valuations to one marked by tighter margins, increasing debt obligations, and more selective investors. For many companies, the challenge today is not growth at any cost but ensuring that existing operations remain sustainable.

In 2025, questions of restructuring are becoming more common. With nearly three billion dollars in debt set to mature by 2026 and limited access to traditional financing, operators are weighing options that range from renegotiating debt to consolidating operations. In cannabis, these decisions are complicated by the fact that federal bankruptcy protections remain largely unavailable.

Restructuring can involve changes in capital structure, operations, governance, and even the overall business model. Understanding when restructuring makes sense, what strategies are available, and how cannabis-specific rules shape the process is increasingly important for leaders across the industry.

1. Indicators That Restructuring May Be Necessary

Restructuring discussions often begin when companies encounter sustained financial or operational stress. The most common signs include steady declines in revenue, rising debt without clear repayment plans, and mounting unpaid tax obligations. For example, SLANG Worldwide was unable to refinance a C$17 million loan that came due in 2024, which ultimately forced it into bankruptcy in Canada and receivership in Colorado.

Declining market share is another indicator, particularly in competitive state markets. Even well-capitalized companies with strong branding are not immune. Jay-Z’s Monogram line, for instance, launched with significant attention but failed to resonate with consumers, contributing to losses at parent company TPCO.  Jay-Z’s Roc Nation team quietly exited its stake in late 2022, returning shares as part of a partnership restructuring.

Operational inefficiencies also create pressure. Tokyo Smoke, a flagship Canadian retail brand, closed 29 stores in 2024 while under creditor protection, re-emerging after just a few months with a slimmed-down footprint of 57 stores.

Cultural and organizational issues can compound financial difficulties. After years of aggressive expansion, MedMen found itself buried under roughly $410 million in debt and unable to generate sustainable profits. In early 2024, the company declared bankruptcy in Canada, while its California operations were placed in receivership. Once celebrated as a billion-dollar pioneer in cannabis retail, MedMen had by 2020 begun defaulting on bills and selling off assets simply to survive.

Recognizing these signs early matters because it determines the range of options available. Companies that delay often find themselves limited to court-supervised processes, while those that act sooner can negotiate with creditors or adjust operations with more flexibility.

2. Types of Restructuring Strategies and Their Objectives

Restructuring can take several forms, each with distinct objectives.

Financial restructuring involves renegotiating obligations with lenders or raising new capital. This may include extending loan maturities, reducing interest rates, or converting debt into equity. BZAM Ltd., a Canadian cultivator, entered creditor protection in 2024 with liabilities exceeding C$112 million. Its restructuring, centered on recapitalization led by insiders, demonstrates how financial adjustments can preserve operations while easing debt pressure.

Operational restructuring focuses on the day-to-day mechanics of the business. This might involve consolidating cultivation sites, closing underperforming retail locations, or introducing more efficient logistics. StateHouse Holdings for example, which generated more than $120 million in annual revenue, still defaulted on loans in 2024. Earlier operational adjustments might have provided breathing room before creditors intervened.

Organizational restructuring addresses governance and management. Many multi-state operators grew quickly with centralized structures that slowed local decision-making. Shifting to more decentralized approaches can help companies respond more effectively to state-specific market conditions. It can also restore credibility with investors and employees, which is often just as important as financial stability.

Strategic restructuring involves rethinking the overall business model. In some cases, this means pivoting away from unsuccessful product strategies or focusing resources on the most profitable segments. 

In practice, restructuring efforts often combine these approaches. Companies may renegotiate debt while closing facilities, bring in new leadership, and reposition their brand simultaneously. The goal is not just to stabilize the business but to ensure it remains competitive in a changing market.

3. Restructuring Pathways for Cannabis Businesses

Where cannabis differs from other industries is in the tools available. Federal bankruptcy protections, such as Chapter 11, are generally closed to operators because courts consider cannabis to be illegal under federal law. That limitation shapes the restructuring landscape in important ways.

The most common pathway is state court receivership, where a receiver is appointed to manage the company and protect creditor interests. StateHouse Holdings followed this route in California in 2024, with its assets ultimately auctioned off to repay lenders.

Another option is the Assignment for the Benefit of Creditors (ABC), a state-level process in which assets are transferred to an assignee who distributes proceeds to creditors. This is faster and less costly than bankruptcy but provides fewer protections for management.

Some companies pursue out-of-court workouts, negotiating directly with creditors to extend deadlines or restructure obligations. These arrangements preserve more flexibility and can prevent the need for formal proceedings, but they depend on early engagement and credible financial oversight.

Occasionally, exceptions appear. The Hacienda Company case in California, where the firm had already exited cannabis operations, was allowed to move forward in bankruptcy court. While unusual, such precedents hint at possible changes if federal rescheduling of cannabis advances.

Practical Considerations for 2025

For cannabis operators, the value of restructuring lies in preserving optionality. Companies that wait until defaults pile up may have little choice but receivership. Those who act sooner can negotiate, restructure operations, or even pivot their strategy with more control.

Practical steps for leaders include maintaining accurate, real-time financial dashboards; running quarterly scenario planning to anticipate liquidity needs; and opening discussions with creditors before repayment crises emerge. Bringing in experienced advisors — whether fractional CFOs or specialized restructuring teams — can also provide the credibility that lenders and investors require in difficult negotiations.

Restructuring in cannabis is less about failure and more about adaptation. The industry’s financial ecosystem is still evolving, and operators that move decisively can often stabilize and prepare for future opportunities.

At Verdant Strategies, our role is to help cannabis companies navigate these options, evaluate the most viable pathways, and engage with creditors and stakeholders effectively. In a sector where traditional bankruptcy is not available, careful planning and informed decision-making are essential to turning a difficult situation into a sustainable future.