Cannabis Producer Canopy Soars on Prospects of Entering U.S.
(Bloomberg) -- Canopy Growth Corp. jumped after the cannabis producer said it expects to gain broad access to the U.S. market this year -- with help from Corona beer maker Constellation Brands Inc.
Canopy, which sells raw flower and other products containing THC in its home country of Canada, already has arrangements with Acreage Holdings Inc. and TerrAscend Corp. to help it enter the much-larger U.S. market quickly once marijuana is federally legal. Yet with uncertainty over the timing and nature of U.S. legal reform, just what would trigger that entry has remained murky.
The company on Tuesday offered its most concrete statements yet on the prospects for U.S. access, saying that it sees potential before the year is out. Canopy even believes it can do so in scenarios other than “straight-up legalization” under the deal with Acreage, which gives Canopy a 70% stake under full federal legalization or at Canopy’s own discretion.
Canopy’s investor Constellation is helping to determine just how to weigh such discretionary risks, according to Chief Executive Officer David Klein. The companies are talking with Nasdaq, the Toronto Stock Exchange and banking partners to understand the options under various scenarios.
“We cannot, and will not break the law,” Klein said in an interview after Canopy reported third-quarter earnings. “What we do have is discretion to determine when we and Constellation and our other partners feel comfortable saying we’ve met the triggering agreement.”
Canopy’s U.S. shares climbed as much as 15% in New York trading, the biggest intraday gain in over a month. The stock gained 17% last year.
Klein said the relationship with Constellation “is becoming closer” and that the two companies share a common vision. He declined to specify which quarter of 2021 he sees the companies beginning to sell THC products in the U.S.
Canopy has become a specialist in beverages that contain THC, as well as those with only CBD, which already have limited sales in the U.S. It also has a partnership with Martha Stewart on CBD products, which it said are doing particularly well.
The performance helped lift Canopy, which topped analysts’ estimates for net sales in the past quarter.
Klein said the company’s optimism about accessing U.S. markets increased this year when the Democrats took control of the Senate, and early comments by legislators have been encouraging. The developments, along with legalization in a growing number of U.S. states, have generated momentum for the cannabis industry.
While Canadian companies have eagerly awaited relaxed regulations south of the border, firms without deals such as Canopy’s are seen as having a more difficult time accessing the U.S. market even if full legalization occurs.
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