Constellation Brands is taking over Canopy Growth, and investors are happy about it.
The Canadian cannabis stock Canopy Growth has been in a transition period ever since last summer. In July, the board fired former CEO Bruce Linton, and the company has been looking for a replacement ever since. And now, it appears they found that person.
Today, Canopy Growth shares ticked higher after the board announced it found its new CEO. David Klein, the executive vice president and chief financial officer of Constellation Brands, will step in as CEO on Jan. 14.
This is an interesting turn of events for Canopy Growth, and investors are reacting favorably to the news. The stock rose 3.5% in premarket trading after the news came out.
The backstory on CGC’s partnership with Constellation Brands
The cannabis industry has had a tough go of it in 2019. Most cannabis companies are massively underperforming, and Canopy Growth hasn’t escaped this trend.
HealthCanada has been slow to issue retail licenses to cannabis companies. So most cannabis companies have been slow to get their products to market, and their revenue suffered as a result. The most recent round of earnings reports reflects this.
The hope is that these companies can stick around long enough for the cannabis industry to start picking back up. That’s why the one bright side for Canopy Growth has been its partnership with Constellation Brands.
On Oct. 17, the next round of marijuana legalizations hit Canada, which means that it’s now legal to sell edibles, vaping products, and cannabis-infused beverages. Canopy Growth has been able to develop a number of new products, thanks in large part to its partnership with Constellation Brands.
Unlike many other cannabis companies, Canopy Growth has the cash to continue growing and developing new products. The company has more free cash flow than almost any of its competitors. It’s also in a better position to market and sell its products.
Constellation Brands has been an asset to Canopy Growth, so the addition of Klein to the leadership team could be a good move. In a press release, the company highlighted Klein’s leadership skills and his experience with consumer packaged goods and working in highly regulated environments.
Wall Street considers the company a moderate buy, and many analysts believe the company still has potential. So while Canopy Growth is still on shaky ground, this new addition could help move it in the right direction.