Chicago-based PharmaCann Inc., the country’s largest privately held cannabis company, informed the state on Friday that it will shut down its Denver grow facility, permanently eliminating 132 jobs.

The facility, 5141 N. National Western Drive, is one of the largest in the state. Its closure highlights the financial squeeze that the cannabis industry is facing in Colorado.

“The entire facility will close on May 20. The action is expected to be permanent. The employee separations because of this action will occur on May 20,” said Nathan Fete, the company’s chief manufacturing operations officer, in a Worker Adjustment and Retraining Notification letter sent to the Colorado Department of Labor and Employment.

PharmaCann entered Colorado in February 2022 when it completed its all-stock acquisition of LivWell Enlightened Health. It also acquired The Clinic, a boutique retailer, later that year.

In hindsight, it now appears PharmaCann bought at the top of the market and is paying the price for it and is pulling out of Colorado. The company has been missing lease payments, according to a settlement reached with its largest landlord.

In December, PharmaCann reached an agreement to sell its 17 LivWell dispensaries, as well as intellectual property, contracts and inventory to Minneapolis-based Vireo Growth for $49 million in stock.

Vireo Growth also signed a management services agreement to run the retail locations until the deal closes, which is expected to happen in the first half of the year. In the past, an acquisition like that would have included grow facilities.

But Vireo Growth is pursuing an “asset-light” strategy. Buying on the open market has become increasingly cheaper than trying to grow marijuana in-house.

That’s because wholesale flower prices in Colorado have collapsed. From a peak of $1,721 a pound in 2021, they were running $648 a pound in December, according to BusinessDen.

Colorado’s Marijuana Enforcement Division reports that there were only 488 licensed recreational growers in the state in December, nearly half as many as in December 2021.

Vireo Growth also has plenty of area production capacity following its $111 million credit bid late last year for Denver-based Schwazze. By buying up the company’s debt at a discount, Vireo Growth forced the owner of the Medicine Man brand into a restructuring that gave it control of two indoor grow facilities in Denver and an outdoor operation near Rye, as well as several dispensaries.

In December, Vireo Growth announced it would purchase San Francisco-based Eaze in December for $47 million in stock. In June, Eaze closed a 92,000-square-foot grow facility at 830 Wyandot in Denver, laying off 45 employees. It was looking to close its retail stores before Vireo Growth stepped in and acquired 14 of them.

Between LivWell, Medicine Man and Green Dragon, Vireo Growth will operate about 55 dispensaries in the state, making it Colorado’s largest marijuana retailer and giving it a ready outlet for its grow operations.

Additionally, it has acquired Hawthorne Gardening from Scotts Miracle-Gro, a key supplier of nutrients and lighting to cannabis growers. That should provide it with a cost advantage over rivals.

However, Vireo Growth is making its acquisitions with a weak currency, increasing the risk involved. Its shares are in the penny stock range, closing at just under 40 cents a share on Friday. They have fallen by a third in value this year.

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