Canadian cannabis company Canopy Growth Corp stunned the market Wednesday with the news that its co-Chief Executive Bruce Linton is stepping down from his role and will leave the board.
The company CGC, -1.26% , WEED, -0.72% which is the biggest cannabis company by market capitalization thanks to a $4 billion investment from Corona beer distributor Constellation Brands Inc. STZ, +1.31% said Mark Zekulin has agreed to be sole CEO and will work with the board to find a new leader, a task that will include internal and external candidates.
“Creating Canopy Growth began with an abandoned chocolate factory and a vision,” said Linton in a statement. “The board decided today, and I agreed, my turn is over.”
Linton has been a very public face for Canopy and has given multiple interviews to publications across the globe telling the company’s story. Canopy was founded in 2013 and commands a market cap of almost $14 billion. Earlier this month, it won shareholder approval to acquire Acreage Holdings Inc. ACRGF, -4.41% a multi-state operator that will give it a foothold in the lucrative U.S. market as soon as federal laws are eased.
“Bruce has been a pioneer in the industry and it will be tough to see him go,” said Korey Bauer, portfolio manager of the Cannabis Growth mutual fund CANNX, -1.11% launched by Foothill Capital Management.
For more, read: Canopy Growth isn’t buying Acreage Holdings, it’s buying the right to buy Acreage Holdings
The news comes just weeks after Canopy’s fiscal fourth-quarter earnings disappointed investors as the company’s losses mounted and it sold less cannabis sequentially, in the second quarter of recreational cannabis legalization in Canada.
For more, read: Canopy co-CEO defends large losses as a deserved reward for pot company’s employees
Constellation Brands, which has made a huge bet on Canopy, was not happy with Chief Executive William Newlands saying on the company’s earnings call last week that he was not pleased with Canopy’s numbers.
“While we remain happy with our investment in the cannabis space and its long-term potential, we were not pleased with Canopy’s recent reported year-end results,” Newlands said in the call. “However, we continue to aggressively support Canopy on a more focused long-term strategy to win markets and form factors that matter, while paving a clear path to profitability.”
For more on Mark Zekulin: Canopy Growth’s quiet co-CEO on the pot company’s ambitions in the U.S. and more
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Constellation’s share of Canopy’s losses came to $106 million, or $78.2 million including tax benefits.
Constellation made its initial investment last year with the option to take a majority interest in the future. The two companies are working together on developing drinkable cannabis products, which are set to launch in Canada Dec. 16. To that end, Canopy has told MarketWatch in the past that the Corona maker is helping it design a bottling factory across the street from its Smiths Falls, Ontario headquarters and helps with due diligence when asked during acquisitions.
Bauer from the Cannabis Growth mutual fund said he expects Canopy will search for a big consumer packaged goods replacement.
“The success of Canopy and all cannabis companies will come down to brands,” he said. “Short-term this may be a negative but we already have seen the largest CBD company in the U.S. (Charlotte’s Web) name Adrienne Elsner as CEO.”
Elsner is the former president of the U.S. snacks division at Kellogg Co. K, -0.13%
Shares were last down 8% in premarket trade, but have gained 49% in 2019, while the ETFMG Alternative Harvest ETF MJ, -1.50% has gained 27%.
S&P 500 SPX, +0.29% has gained about 19% and the Dow Jones Industrial Average DJIA, +0.26% has gained 15%.
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