Battle of Bophelo: Akanda’s Plan B: Abandon Lesotho! Or is That Actually Plan A?
Nasdaq-listed Akanda is fighting to reverse the liquidation of its Lesotho subsidiary, Bophelo Bioscience and Wellness, and says it is committed to growing the business into which it has invested millions of dollars. But it has a Plan B. Pull out of Lesotho altogether and source from Portugal.
Akanda says its fighting tooth-and-nail to claim back what is rightfully its own property after the surprise liquidation of its 100% subsidiary, Bophelo Bioscience and Wellness in Lesotho. But it’s also indicated that if it doesn’t successfully reverse the judgement – or get any joy from legal action against Louise Mojela - it is not too alarmed at losing its Lesotho subsidiary altogether. Mojela, who founded Bophelo in 2018, was Akanda's executive chairman before her dismissal in June 2022. She put Bophelo into liquidation without the authorization of any other directors, in what Akanda called an act of revenge by a disgruntled former director..
Bophelo is Akanda’s main cultivation play, so Plan A, is for Bophelo to be developed into one of the world’s largest cannabis producers. It is currently using a fraction of its licensed area of 200 ha and harvested only a small crop this year. Akanda’s intention has been to scale it up in order to supply its UK pharmaceutical distribution network, Canmed.
Plan B is Portugal, where Akanda acquired cultivator Holigen in May 2022 for approximately US$4,3 million in a mixture of cash and Akanda shares.
Virk’s statement on 26 July 2022, gave an indication that losing Bophelo might not be such a bad thing after all as it would be a cash saver. He said although Akanda was committed to its Lesotho grow and uplifting local communities, there was a business case to be made for sourcing cannabis for the EU from Portugal instead of southern Africa.
“In May 2022, Akanda acquired Portugal-based Holigen, an EU GMP certified medical cannabis producer, which has the means to potentially contribute profits to Akanda over the next six to nine months. With Holigen, Akanda believes it has more than sufficient capacity to produce premium quality indoor, outdoor and greenhouse medical cannabis within the European Union as the market matures. Additionally, with shifting market dynamics, we have found higher demand from German and UK customers for product produced in Portugal than Lesotho due to evolving EU regulations” said Virk.
“In the event we are unable to reverse the determination of the Lesotho Court, Akanda may actually experience considerable savings and greater profitability as a result of reduced expenditures and the elimination of losses associated with Bophelo’s operations.”
At the time of Akanda’s acquisition of Holigen, Virk said the licensed Portuguese company provided the added superior genetics, capacity, and route-to-market Akanda needed to capture a share of the rapidly emerging cannabis market across the EMEA (Europe Middle East Asia) region.
“Together with Holigen, we are positioned to be a leader in today’s medical cannabis environment and to have the ability to scale to the recreational opportunity as it unfolds.”
Akanda’s statement detailed the funding agreement below:
Akanda acquired 100% of the issued and outstanding shares of Holigen for a combination of approximately US$3.0 million in cash (C$3.75 million), 1.9 million Akanda common shares, and the assumption at RPK of approximately US$4.3 million (€4.0 million) of debt which is non-recourse to Akanda. In addition, to further align Akanda and Flowr (a shareholder in Holigen), concurrently with the closing of the acquisition, Akanda purchased 14,285,714 Flowr common shares for aggregate gross proceeds to Flowr of approximately US$790,000 (C$1.0 million) at a price per share of C$0.07. Akanda has provided at least US$678,000 of interim funding to Holigen to support its working capital needs prior to closing.
Should Akanda abandon Lesotho, this would be a similar path to that of Canopy Growth, the Canadian multinational that invested heavily in the Mountain Kingdom before a strategic withdrawal in 2020.