Largest Cannabis Delivery Company in California to Shut Down
Eaze, the largest cannabis delivery company in California, is set to shut down by the end of the year. The CEO, Cory Azzalino, announced the closure in a letter, citing ongoing challenges in the state's cannabis industry as the reason for the company's foreclosure of assets on August 6. The San Francisco-based company is currently winding down operations and is expected to fully close around December 31.
Company's Future and Employee Impact
Eaze's management team is working with a group to transfer the assets under new ownership and to determine whether operations will reopen next year. This decision could potentially lead to layoffs for around 500 workers, as per the United Food and Commercial Workers, the union representing those employees.
Eaze's Journey
Eaze was founded in 2014 and provides on-demand delivery to adults across California and Michigan. The company saw rapid growth after California legalized recreational marijuana in 2018, becoming one of the largest cannabis delivery companies in the state. Despite being valued at $700 million at one point, the company has faced financial issues over the years. In 2021, former Eaze CEO James Patterson pleaded guilty to conspiracy to commit bank fraud, a case related to that of Hamid Akhavan, a consultant for the company, who was convicted of deceiving credit card companies into processing marijuana transactions.
Investor Involvement and Company Ownership
In 2021, tech investor and Netscape co-founder James Henry Clark invested in Eaze but faced lawsuits with other investors in subsequent years. In 2022, Clark loaned Eaze $36.9 million but foreclosed on the company at the start of this year. Clark took ownership of Eaze in August after purchasing the company for $54 million at auction, although his plans for the company remain unclear.
Cannabis Industry in California
Eaze joins a growing list of cannabis-related businesses in California that are closing. Five companies have downsized or closed since 2023, including MedMen, Herbl, Flow Kana, High Times, and GrassDoor. A report by GreenWave Advisors found that marijuana companies owe California around $732 million in unpaid sales, excise, and cultivation taxes, including penalties and interest. However, 72 percent of those taxes are owed by businesses that are no longer in operation.
Regulatory Changes
This news comes as California Gov. Gavin Newsom proposed emergency regulations last month to ban THC from foods and drinks accessible by people under 21 years old. He also signed Assembly Bill 1775 to allow cannabis consumption lounges to operate statewide.
Bottom Line
The closure of Eaze, once a prominent player in California's cannabis industry, is a significant development. It highlights the ongoing challenges faced by cannabis businesses in the state. The potential layoffs, unpaid taxes, and regulatory changes all add to the complex landscape of the cannabis industry in California. What are your thoughts on these developments? Do you think the cannabis industry in California will recover, or will more companies face similar fates? Share this article with your friends and let us know your thoughts. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.
