Charlotte’s Web Appoints a New CEO Following June Shareholder’s Revolt

Charlotte’s Web Appoints a New CEO Following June Shareholder’s Revolt

The move follows a tumultuous summer, which saw the company’s founders attempt to stage a corporate coup to take back control of the CBD titan.

The continuing soap opera surrounding Charlotte's Web Holdings, one of the world's largest and most iconic CBD manufacturers and brands, added another dramatic chapter to its saga this week. According to multiple media outlets, the hemp-CBD products company selected Bill Morachnick as chief executive and board director this week to replace embattled Jacques Tortoroli, who resigned as CEO and from the company's board earlier this summer.


In a surprising twist, CW Holdings also rejected the resignations of three other board directors following a withhold campaign staged by a group of activist shareholders led by the company's founders, Joel and Jesse Stanley, in June.


The Stanley brothers were the original "rock stars" of the CBD market explosion just a few short years ago. The duo was riding high as they took their company public on the Toronto Stock Exchange and the OTCQX Venture Market in the United States in September 2018. However, since then, CW's stock price has plummeted from an all-time high of $21.90 on April 1, 2019, to its current value of only $0.2196 (about 22 cents) as of June 12, 2023.


Motivated by that catastrophic collapse, the brothers attempted to oust four members of the current Board of Directors by calling on shareholders to withhold their potential votes for Tortoroli, Board President John Held, and independent directors Thomas Lardieri and Alicia Morga during the company's annual general meeting this past June.


In a statement released before the meeting, Joel Stanley said, "The incumbent Board and management's business strategy has been to pin their hopes on FDA regulations changing in favor of the business. Rather than innovate within the current framework, the Company continues to burn money on conventional marketing."


"The incumbent Board and management's business strategy has been to pin their hopes on FDA regulations changing in favor of the business. Rather than innovate within the current framework, the Company continues to burn money on conventional marketing."

- Joel Stanley, Co-Founder of Charlotte's Web Holdings


Among the many criticisms leveled at CW's executive leadership team, changing the company's CFO four times in the past two years and paying "exorbitant compensation to the CEO and other senior executives" were highlighted as proof that the current board lacks focus and a grasp of the company's most important priorities.


Jesse Stanley echoed those sentiments in the statement, saying, "The significant cash burn rate with decreasing revenues must end immediately. The current leadership blames the general industry decline and regulatory headwinds to avoid taking responsibility for their actions. The truth is that the actions of this board have clearly contributed to the destruction of shareholder value."


"The significant cash burn rate with decreasing revenues must end immediately. The current leadership blames the general industry decline and regulatory headwinds to avoid taking responsibility for their actions. The truth is that the actions of this board have clearly contributed to the destruction of shareholder value."

- Jesse Stanley, Co-Founder of Charlotte's Web Holdings


Despite their efforts to take back control of the board and the company they founded, the company chose to forge a compromise instead of allowing the brothers to come back and take over the stewardship of the CBD behemoth.


In its Wednesday press release announcing the new CEO, CW Holdings said a committee of independent board members had reviewed the issue "and determined that there are exceptional circumstances that warrant the rejection of the offers to resign." As a result, Board directors John Held, Thomas Lardieri and Alicia Morga remain on the board, according to Charlotte's Web Director of Investor Relations Cory Pala.


CW Holdings went on to say in its news release, "Mr. Morachnick is a global business executive with a track record of building premium, differentiated products and brands across multiple channels throughout the world and across a broad range of product categories. He is a proven entrepreneurial professional skilled in taking companies global and creating and managing strategies for consistent and sustained growth."


"Mr. Morachnick is a global business executive with a track record of building premium, differentiated products and brands across multiple channels throughout the world and across a broad range of product categories. He is a proven entrepreneurial professional skilled in taking companies global and creating and managing strategies for consistent and sustained growth."

- CW Holdings Press Release


Morachnick's previous post was as president of Santa Fe Reynolds Tobacco International, where he "led the subsequent integration" of the organization following its acquisition by the Japan Tobacco Group. As part of his new duties, Morachnick will also take over Tortoroli's Board position as a non-independent director.


Going with an outsider from the Big Tobacco industry instead of welcoming the Stanleys back to right the listing corporate ship is an odd choice. Industry advocates and stakeholders have worried about the influence of Big Tobacco and Big Alcohol on the hemp and cannabis industries for years.


With CW Holding's decision to go with an entrenched tobacco insider over the two pioneering mavericks who founded Charlotte's Web to lead the company out of its current slump, many insiders worry about the upsetting precedent it sets.


The problems plaguing companies like CW Holdings are not all leadership-related. The hemp sector has struggled since the waning days of the COVID-19 lockdowns. With no effective guidance from the US Food and Drug Administration (FDA) from a regulatory standpoint and a lack of clarity concerning the legality of hemp-derived products like CBD from Congress, many CBD companies are struggling to survive even with the sharpest and most imaginative executive leadership teams.


Hopefully, Morachnick's appointment is not an ominous sign of things to come for the hemp and CBD markets. Regardless, vigilance on the part of ardent hemp industry advocates will always be required to keep the damaging and greedy hands of BT and BA out of the coffers of cannabis and hemp. Either way, Charlotte's Web's story is a cautionary tale for all CBD companies to heed and take very much to heart.