SOL Global Investments Corp. (CSE: SOL) (OTCPK: SOLCF) reported unaudited earnings for the quarter ended August 31, 2021, with a loss of $ 62.4 million compared to last year’s income of $ 43.7 million dollars for the same period. Sol Global noted that this was a negative change of $ 106.1 million. The company attributed it to the one-time expense related to the settlement agreement with its former lender of $ 68.5 million.

For the quarter, the company reported just $ 12.5 million in total investment gains, up from $ 60.3 million last year for the same period. This represents a negative variation of $ 47.8 million between periods. Sol Global claims this is due to overall market weakness.

“Managing small-cap and long-side cannabis investments in the third quarter was like playing the game in a minefield,” said Andy DeFrancesco, president and CEO of SOL Global. “Even the positive news has seen stock prices continue to decline. Once again my team struggled and we outperformed in our sectors. We remain extremely confident in our underlying positions and will not be pressured by price movements in the short term. We will stick to our 2- to 5-year time horizons on the core positions that enable small businesses to properly execute the business models we support. “

Loan settlement issues

Sol Global has settled its dispute with its previous lender 1235 Fund. The two companies have engaged in a battle over whether the once-private Verano shares could be claimed as collateral for a loan. Sol Global attempted to move the case to New York but was pushed back. 1235 Fund had actually suggested the shares were worth $ 500 million, but was ultimately settled for less.

In August, it was announced that a subsidiary of SOL Global would purchase all of the rights to 1235 under the debenture for C $ 120 million (C $ 68.5 million above principal and accrued interest of debenture) and which was paid on September 7, 2021. The subsidiary obtained an equity investment from SOL Global which entered into a loan agreement with an arm’s length private lender for a guaranteed loan in the principal amount of 50 million Canadian dollars. The Loan will have a term of 12 months and will bear interest at the rate of 9% per annum.

The dispute between the two sides arose after Sol Global began to claim that MMCap and 1235 Fund had no rights to Verano shares as a repayment of a loan. Sol Global was in a liquidity crisis in July 2019. The only thing of potential value she owned was a large investment in privately-held cannabis company Verano. MMCap bought the debenture through what was called the 1235 Fund giving Sol $ 50 million with the risk that Sol could eventually go bankrupt and not repay the $ 50 million or that the shares of Verano is worth a lot less than the $ 50 million she spent. At the time, it was a risky deal because it was difficult to determine the outcome. Cannabis stocks were suffering from a huge bear market and valuations had plunged across the board. Sol Global just wanted to pay back the 1235 Fund in cash, while the 1235 Fund wanted to get back the now listed Verano shares.


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