David George-Cosh

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Shares of Cronos Group Inc. plunged on Tuesday after the Canadian cannabis producer said it would delay the release of its third-quarter results following a request from its auditor for more time to calculate a writedown of the company's U.S. business.

Cronos said it will take an impairment charge of at least US$220 million in its U.S. business, which mainly sells and distributes CBD products, when it does release its quarterly results. Cronos said it anticipates filing its third-quarter results within the next 60 days, but it cannot assure that timing.

"The company has been unable to complete its financial statements for the three and nine months ended Sept. 30, 2021 because the audit committee of the company’s board of directors requires additional time to evaluate goodwill and indefinite-lived intangible assets in the company’s U.S. reporting unit for impairment," the company said in a statement.

In addition to the delay in filing its third-quarter results, Cronos has proactively applied for a management cease trade order with Canadian securities regulators. 

Cronos' shares rose more than 26 per cent on Monday following an article by New Cannabis Ventures that speculated that tobacco giant Altria Group Inc. would wholly acquire the cannabis company. Altria owns 45 per cent of Cronos and has warrants to acquire the rest of the company, but at $19 each, they're priced well above the company's current share price.

Cannabis companies, including Cronos, were also lifted Monday by broad investor sentiment from the leak of a draft bill led by a freshman Republican congresswoman that would legalize cannabis federally.

A report by Stifel Analyst Andrew Carter on Monday dismissed the idea Altria would buy Cronos now as it has no incentive to do so.

"Altria has no incentive at this point-in-time to acquire a majority stake in Cronos given the tobacco giant has majority board control and would be consolidating Cronos’ operating losses with little benefit to overall revenue, in our opinion," Carter said. "We do not believe a purchase of Cronos would be welcomed by Altria shareholders at this time."

Cronos was expected to report US$18.6 million in its third-quarter revenue, up 63.5 per cent from a year earlier, while posting an adjusted EBITDA loss of US$34.7 million, according to a poll of analysts from Bloomberg.