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Monday, November 23, 2020

Here is How Canopy Growth Corp (NYSE: CGC) Set Fire to the Cannabis Patch

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In case you missed it, the cannabis patch got lit on fire on Wednesday, with a burning core made of Canopy Growth Corp (NYSE: CGC). Fueling the flames, the company just announced, along with Constellation Brands (STZ) (NYSE: STZ.B), a significant expansion of their strategic partnership to position Canopy Growth as the global leader in cannabis production, branding, intellectual property and retailing.

According to the release, “Constellation Brands will increase its ownership interest in Canopy Growth by acquiring 104.5 million shares directly from Canopy Growth, thereby achieving approximately 38 percent ownership when assuming exercise of the existing Constellation warrants.  Constellation Brands is acquiring the new shares at a price of C$48.60 per share, which is a 37.9 percent premium to Canopy’s 5-day volume weighted average price of the common shares on the Toronto Stock Exchange (“VWAP”), and a 51.2 percent premium to the closing price on August 14, 2018.  Constellation will also receive additional warrants of Canopy that, if exercised, would provide for at least an additional $4.5 billion CAD to Canopy Growth.“

Canopy Growth Corp (NYSE: CGC) is one of the bigger growers in the industry. The company produces and sells medical marijuana in Canada. It offers dry cannabis and oil products primarily under the Tweed and Bedrocan brands. It also sells its products online.

According to company materials, “Tweed is the most recognized marijuana production brand in the world. It has built a large and loyal following by focusing on quality products and meaningful customer relationships. Tweed doesn’t just sell marijuana, it facilitates a conversation about a product we’ve all heard about but haven’t met intimately yet. It is approachable and friendly, yet reliable and trusted. As marijuana laws liberalize around the world, Tweed will expand its leading Canadian position around the globe.”

Also from their materials, “Bedrocan is the epitome of medical-grade cannabis. Bedrocan BV pioneered medical cannabis in Holland through decades of selection and refinement, leading to standardized, whole bud cannabis strains that patients can rely on. Bedrocan Canada supplies the same standardized strains to the Canadian market through exclusive licensing rights to the American continents, an arrangement it will also enjoy for all future genetic advancements. Due to its consistency over time, Bedrocan’s strains have been used in clinical research in seven European countries. That commitment to research didn’t stay on the east side of the Atlantic – Bedrocan Canada recently launched one of the largest clinical cannabis studies in the world, the EQUAL Study, to evaluate quality of life before and after medical cannabis use.”

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Recent action has seen 21% added to share values of the name over the past month of action. In addition, the company has registered increased average transaction volume recently, with the past month seeing just under 290% above the average volume levels in play in this stock over the longer term.

“Through this investment, we are selecting Canopy Growth as our exclusive global cannabis partner,” said Rob Sands, Chief Executive Officer, Constellation Brands.  “Over the past year, we’ve come to better understand the cannabis market, the tremendous growth opportunity it presents, and Canopy’s market-leading capabilities in this space.  We look forward to supporting Canopy as they extend their recognized global leadership position in the medical and recreational cannabis space.”

At this time, carrying a capital value in the market of $4.95B, CGC has a significant war chest ($323.2M) of cash on the books, which compares with about $1.6M in total current liabilities. CGC is pulling in trailing 12-month revenues of $77.9M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 55.6%. We will update the story again soon as developments transpire. Sign-up for continuing coverage on shares of $CGC stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $CGC, either long or short, and we have not been compensated for this article.

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