25 Jun

Canopy Growth Plans to Deploy Cash from Constellation Brands


Cash backing

Canopy Growth (WEED) (CGC) has a strong balance sheet with a cash balance of ~4.5 billion Canadian dollars, which it received from an infusion from Constellation Brands. The company will use the cash to make acquisitions. However, Canopy Growth’s CEO, Bruce Linton, said that the company doesn’t intend to purchase smaller producers.

Canopy Growth probably won’t purchase smaller producers for additional production capacity. Canopy Growth pursued additional production capacity to capture initial growth in the market. However, the company has increased significant production capacity internally. Acquiring producers for extra space isn’t necessary anymore.

Early on June 24, Canopy Growth announced that it received a new license from Health Canada to grow cannabis at its outdoor facility in Saskatchewan, Canada. The facility has a capacity of ~7 million square feet or ~160 acres. The facility will add to Canopy Growth’s 4,000 acres of existing capacity. The extra capacity will help cultivate high margin products. To learn more, read Canopy Growth Gets License for Outdoor Facility in Saskatchewan.

Acquisitions are a top priority

In the earnings call held on June 21, Canopy Growth’s acting CFO, Mike Lee, said that acquisitions are a “top investment priority” for the company. He called the Constellation investment a “war chest” to help the company meet its acquisition needs. Canopy Growth will likely continue to acquire companies that have the intellectual property for cannabis derivative products that command a higher margin. Aurora Cannabis (ACB) has a similar plan. To learn more, read Aurora Cannabis Ready for the Next Phase of the Cannabis Market.

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