Canopy Earnings
Investors won’t have to wait long to hear more about how the world’s largest cannabis company is preparing for the launch of the new product formats. Canopy Growth Corp. is scheduled to report earnings post-market on Thursday followed by an analyst call Friday morning.
The company is probably the furthest ahead in terms of its preparations for the new product formats, with a 197,000-square-foot bottling plant near its headquarters in Smiths Falls, Ontario set for completion in the fall. Some say its bet on cannabis beverages is a risky one, given that consumer demand for such a product is relatively untested, but Chief Executive Officer Bruce Linton is a fervent believer in pot drinks.
“We’ve done such a good job with the anti-smoking campaign, I think getting people to smoke cannabis is less likely than getting them to drink it,” Linton said on the sidelines of a conference earlier this month.
Canopy can also afford to take more risks than many of its competitors. With a $4 billion investment from alcohol giant Constellation Brands Inc., it has both the cash and the beverage expertise to take a leadership position in the drinkable pot space -- if that’s what consumers want to buy.
Forget the idea of a pot-infused Coors Light though. The new Canadian rules strictly forbid the mixing of the two intoxicants.
Looking ahead to Canopy’s fiscal fourth-quarter results, Bloomberg Intelligence analyst Kenneth Shea expects the company’s revenue to more than triple from a year earlier.
“Gross profit before fair value adjustments may rise at a proportional pace, but we expect operating losses to persist from higher expenses tied to share-based compensation, marketing, R&D and acquisitions,” Shea wrote.
Acreage Vote
Canopy will also find out this week if shareholders support its proposed takeover of Acreage Holdings Inc. Investors in both companies will vote Wednesday on the deal, which is dependent on the U.S. changing its federal pot laws and could take years to close.
Currently, the offer values Acreage at about $3.1 billion, or a little over $26 a share. That’s well above the company’s closing stock price of $18.75 on Friday, implying investors aren’t optimistic the deal will get done. Activist investor Marcato Capital Management has already said it will vote against the transaction because it limits the potential upside of Acreage’s stock.
For the deal to move ahead, at least two-thirds of Acreage shareholders must vote in favor, including a majority of the subordinate and proportionate voting shares. Canopy investors must approve the deal by a simple majority. If they do approve it, Acreage holders will get an immediate sweetener of $2.55 a share.