Constellation Brands Lets Canopy Growth Warrants Expire Unexercised
Constellation Brands (NYSE: STZ) appears to have walked away from the idea of investing further dollars into Canopy Growth (TSX: WEED). The company on Wednesday saw its Tranche A warrants held in the company expire, ending future investment opportunities in the company under its original investment agreement from 2018.
As of November 1, 88.5 million Tranche A warrants, which contained an exercise price of $50.40, have expired unexercised. While it was rather obvious that the warrants would not be exercised at this price, given the company closed Wednesday’s session at just $0.83 per share, it’s noteworthy that Constellation was seemingly disinterested in revising the warrant pricing prior to expiry.
With the Tranche A warrants expiring unexercised, the vesting terms of Tranche B warrants, which contain an exercise price of $76.68 per share, were not met, and as a result have expired as well. 12.8 million Tranche C warrants have likewise expired. Collectively, the three tranches of warrants would have enabled Constellation to increase its stake in the cannabis operator by a combined 16.9%.
As of Friday’s close, Constellation, through Greenstar Canada Investment Limited Partnership, owns 171.5 million shares of Canopy as well as $100.0 million in principal of promissory notes due 2024.
Constellation initially invested $5.0 billion in Canopy back in 2018, in what was a cornerstone investment for the cannabis industry as a whole. The investment at the time resulted in the company owning a 37% stake in the issuer, and with related warrants provided a path for the beverage alcohol company to secure a majority stake in Canopy.
READ: Canopy Growth Collects $53 Million From Sale Of Hershey Drive Facility
Continued failures by Canopy however have forced Constellation to take writedowns on its investment, with Constellation recording over $1.0 billion in impairments in a single quarter last year. Canopy Growth meanwhile, despite the several billion investment, today has a market valuation of just $713 million, and as of June 30 had a cash balance of just $533.3 million.
Canopy Growth last traded at $0.86 on the TSX.
Information for this briefing was found via Sedar and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.
