A massive deal in the cannabis industry just imploded after a CEO was fired

REUTERS/Andres Stapff

Marijuana plants are seen in an indoor marijuana plantation.

• Massroots was set to buy CannaRegs for a $12 million stock deal in August
• The deal imploded after Massroots' CEO, Isaac Dietrich, was fired
• CannaRegs CEO Amanda Ostrowitz said she pulled the plug on the deal to focus on what's best for her company

CannaRegs is pulling out of a deal with Massroots after Massroots' CEO was abruptly fired by the company's board on Tuesday, CannaRegs CEO Amanda Ostrowitz told Business Insider Wednesday afternoon.

Massroots, a technology platform for cannabis consumers, announced it was buying CannaRegs, a subscription-based service that provides businesses access to all local, state, and federal cannabis-regulations for a $12 million stock deal in August.

The deal is now off after "turmoil" at Massroots, Ostrowitz said. Isaac Dietrich, Massroot's CEO, was ousted by the company's board yesterday while Ostrowitz was traveling outside the country in Italy.

"I had no idea what the hell was going on with the board," Ostrowitz told Business Insider. "We're pulling the plug."

Business Insider has confirmed the deal cancellation with multiple sources close to the negotiations and reviewed a draft letter from Ostrowitz announcing that the deal was off.

Ostrowitz said she needed to do what's best for CannaRegs, and "not be on a roller coaster ride."

Ethan Miller/Getty

A customer pays for cannabis products at Essence Vegas Cannabis Dispensary after the start of recreational marijuana sales began on July 1, 2017 in Las Vegas, Nevada. Nevada joins seven other states allowing recreational marijuana use and becomes the first of four states that voted to legalize recreational sales in November's election to allow dispensaries to sell cannabis for recreational use to anyone over 21.

Ostrowitz, a lawyer by trade, said she has not spoken directly to members of Massroots' board and instead received a confirmation of the withdrawal directly from the company's lawyers.

"This was a deal we absolutely intended to do," Ostrowitz said. "We were in the due diligence, paperwork phase. We did everything we needed to do."

Ostrowitz also praised Dietrich, and said he has a "huge heart," and that she "wants what's best for him."

Adding to the confusion, Ostrowitz said she hadn't intended on selling CannaRegs before she was approached by Massroots. At the time, she was fundraising for CannaRegs after fending off another attempt to purchase the company.

Sources close to the deal told Green Markets Report that the price Massroots offered to CannaRegs was too high, and likely a key reason why Dietrich was ousted by the board.

"We're still on good terms with Massroots," Ostrowitz said. "But Isaac shouldn't be out of the picture."

Ostrowitz declined to comment on the drama at Massroots, instead saying that CannaRegs is cash-flow positive and debt-free, but will need to fundraise to achieve a higher growth rate.

Ostrowitz said she is dealing with the cancelled deal while on a working vacation in Italy, which she said has been more work than vacation.

"I need to go eat some pasta," she said.