Why Canopy Growth Shares Are Soaring Today

Canopy Growth

Why Canopy Growth Shares Are Soaring Today

Constellation was among the first major alcohol producers to invest in marijuana production when it pumped almost $200 million into Canopy past year, but the latest announcement makes it by far the biggest investment in the industry.

The alcohol firm wants to capitalise on the growing legalisation of the drug.

"Our business can now make the strategic investments required to accelerate our market position globally", said Bruce Linton, co-chief executive of Canopy Growth. Molson Coors said this month its Canadian arm would make cannabis-infused drinks with Hydropothecary Corp (HEXO.TO). Heineken's Lagunitas craft-brewing label has launched a brand specializing in nonalcoholic drinks infused with THC, the active ingredient in marijuana.

Canopy, Canada's largest marijuana company by market capitalization, is also granting Constellation warrants, which, if fully exercised, will lift its interest above 50 per cent and inject another $4.5-billion into the Smiths Falls, Ont. -based producer.

Founded in 2013 and headquartered in Ontario, Canopy Growth already has a presence in 11 countries and specialises in production innovation and clinical research.

Other publicly traded cannabis companies, such as Cronos and MedMen Enterprises, rallied in the United States and Canada.

The Constellation deal comes as other alcohol companies have also started homing in on the cannabis industry.

Canopy, based in Smiths Falls, Ontario, doesn't now have any operations south of the border, where marijuana is banned federally.

Canopy shares closed at $32.15 on the Toronto Stock Exchange on Tuesday.

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But both companies said they have no plans to sell cannabis products in any market unless it is permitted at all applicable government levels.

Canopy Growth CEO Bruce Linton told CNN's Richard Quest in an interview Wednesday that the deal gives Canopy more credibility.

As part of the partnership, Canopy has a services arrangement with Constellation to use its resources, which would help with a US expansion once permitted, Linton added.

Canopy, which has a presence in 11 markets around the world, said it would make worldwide growth a priority.

USA drinks group Constellation Brands has poured an additional US$4 billion into Canadian cannabis producer Canopy Growth Corporation - the largest investment in the cannabis industry to date. The deal follows Constellation's initial $245-million purchase of 10 per cent of Canopy shares last October.

Canopy's target acquisition list exceeds $1 billion for worldwide assets and non-cultivation assets in Canada, Linton said. This investment will have the company buying a total of 104.5 million shares of CGC stock directly from the company.

Constellation will also receive 139.7 million new warrants, which are exercisable over the next three years.

The company announced on Tuesday that it has issued C$2,500,000 in common shares of Canopy Growth in connection with the expansion of an existing commercial arrangement.

"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".

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