Canopy Growth (TSX: WEED) is one step closer to establishing a US-based multi state operator following the receipt of shareholder approval to rearrange its capital structure.
Shareholders have voted to approve the creation of a new class of exchangeable share of the company, which will enable the creation of Canopy USA, the vehicle that the company intends to use to kickstart its entrance into the US. The new class of shares is non-voting and non-participating, and contain no rights to receive dividends.
Those new rights are key, as it will enable the stock exchanges where Canopy trades to permit the acquisition of US cannabis assets, which include Acreage Holdings, Wana, and Jetty. Those assets will be placed into Canopy USA, the results of which will be deconsolidated from Canopy Growth, while Canopy will also hold a non-controlling interest in the entity.
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The financial engineering is expected to fast track Canopy’s entry into the US cannabis market, which the company says could be as big as US$50 billion by 2026, while establishing a brand “powerhouse.” At the same time, the merger of the three separate US entities is expected to result in cost synergies that reduce operating costs, while also cutting public reporting costs currently being borne by Acreage.
As part of the launch of Canopy USA, the next step is for Constellation Brands to convert its holdings in Canopy into exchangeable shares, while nominees to Canopy’s board will resign. Constellation however will remain the largest shareholder of Canopy.
Once the actions will Constellation are complete, Canopy USA will close on the acquisition of Wana and Jetty, which is slated to occur in Canopy’s second quarter of fiscal year 2025, which translates to the end of September 2024. The acquisition of Acreage meanwhile is expected to occur by the end of fiscal year 2025, which puts that timeline as by the end of March 31, 2025.
The endless hoops that Canopy has gone through to enable the acquisition of the US assets are expected to end once the Nasdaq or NYSE permit the listing of companies that consolidate financial statements of cannabis operations in the US on its exchanges.
“With this successful shareholder vote complete, our Canopy USA strategy is advancing and is poised to make Canopy the first and only U.S. listed cannabis company offering shareholders unique exposure to the rapid growth of the U.S. cannabis market. Canopy USA can now move quickly to acquire its U.S. assets in Wana, Jetty, and Acreage, and we expect Canopy Growth to begin highlighting Canopy USA’s financial performance to our shareholders later this year,” commented David Klein, CEO of Canopy Growth.
Canopy Growth last traded at $10.70 on the TSX.
Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
