In a recent turn of events, Vancouver’s BlueSky Wellness Inc. has decided to abandon its previously anticipated merger with Lucy Scientific Discovery (NASDAQ: LSDI), marking a significant shift in its corporate strategy. BlueSky, a prominent player in the e-commerce hemp sector, has expressed its intention to seek alternative partnerships to fuel its ongoing expansion and achieve its strategic objectives.
Last fall, Lucy had high hopes that the merger, which was to be executed entirely through stock, would enhance its revenue streams by incorporating BlueSky’s robust online sales infrastructure. BlueSky, known for its successful brands such as Keoni and Blush Wellness, has consistently generated over $20 million in revenue annually for the past two years. The collaboration was also set to introduce Lucy’s Amanita Muscaria mushrooms brand, Mindful, to BlueSky’s e-commerce platforms, capitalizing on an intriguing arrangement with High Times to reduce customer acquisition costs.
However, Lucy Scientific has encountered significant challenges, with increasing debt levels and a lack of revenue generation casting a shadow over its financial stability. Despite efforts to promote the deal through press releases and financial disclosures, the necessary funding to finalize the merger has not been secured within the agreed timeframe. Moreover, BlueSky has noted the adverse market conditions faced by Lucy Scientific, particularly the substantial decrease in its share value over the last six months.
Boasting a management team composed of seasoned executives from renowned consumer packaged goods firms such as PepsiCo and General Mills, BlueSky has a proven track record of success in the cannabis, hemp, and psychedelic industries. The company prides itself on its exceptional marketing capabilities, expertise in brand development, and a highly skilled team with vast connections within the Canadian cannabis sector and the wider consumer packaged goods industry, positioning itself for continued success.
For Lucy Scientific, the termination of this merger adds to a series of challenges. Shareholders had been led to believe that the success of this deal, along with a separate agreement with High Times, was crucial for the company’s future. Lucy’s recent earnings report highlighted the potential adverse impact on its business, financial health, and operational results should these acquisitions not materialize.
The anticipated revenue streams from these deals have evaporated, with no further updates on the High Times agreement following allegations of securities fraud against the media company’s Chairman, Adam Levin, by the SEC. The uncertainty surrounding these deals has further exacerbated the pressure on Lucy, especially given the decline in its stock price, a critical factor that BlueSky referenced. The company faces the risk of being delisted from the Nasdaq unless it can elevate its stock price above one dollar by March 19. In an attempt to address this issue, Lucy recently underwent a one-for-ten reverse stock split, temporarily boosting its share price to $1.93. However, Lucy has not yet communicated the cancellation of the BlueSky deal to its shareholders, adding to the growing list of concerns for the company’s future.