Canopy Growth Pops 30% on Constellation’s $4 Billion Investment

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Jan. 11 2020, Updated 12:51 p.m. ET

Canopy Growth stock

On August 15, Canopy Growth (WEED) (CGC) popped 30% when the market opened and rose to $33 on news that Constellation Brands (STZ) intends to invest $4 billion in the company. Constellation Brands, one of the top alcoholic beverage makers with brands including Corona, already invested $200 million in Canopy Growth last year.

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Alcohol infused with marijuana

With this investment come prospects of building a marijuana-infused alcoholic beverage market, which shows where a large market potential for cannabis players lies. One of the challenges that cannabis players such as Canopy Growth, Aurora Cannabis (ACB) (ACBFF), and Aphria (APHQF) face is penetrating the markets (HMMJ) that have never used marijuana before. Infused alcoholic beverages may help them achieve that goal.

The deal

According to Reuters, Constellation Brands will acquire 104.4 million shares of Canopy Growth for 48.6 Canadian dollars per share. Compared to the closing price of 32.15 Canadian dollars on August 14, the price represents a 51.2% premium and will take Constellation Brands’ share in Canopy Growth to 38% from its previous 10%.

As the traditional beer market slows down, Constellation Brands is not the only company to move into the induced-beverage market. Earlier this month, Molson Coors Brewing (TAP) also announced its partnership with Hydropothecary (HYYDF) to produce cannabis-infused non-alcoholic beverages.

Canopy Growth reported its earnings yesterday. To know more, read Canopy Growth Reported Its Q1 2019 Results on August 14.

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