Pot producer Canopy sets up holding entity for speedy U.S. market entry
Reuters
Published Oct 25, 2022 07:36AM ET
Updated Oct 25, 2022 12:56PM ET
By Shariq Khan
(Reuters) - Canadian cannabis producer Canopy Growth (NASDAQ:CGC) Corp is creating a holding company to speed up its entry to the United States and buy partners Acreage Holdings (OTC:ACRGF) Inc, Wana Brands and Jetty Extracts, sending its U.S.-listed shares up 27% on Tuesday.
The deals are expected to make Canopy profitable, with a leading market share in the United States and control over its marijuana assets in the country once it gets federal permission.
Growing and selling marijuana is currently illegal under the U.S. federal law. But with President Joe Biden recently seeking a review on how the drug is classified, a potential change in legislation would allow Canopy to operate directly.
Canopy is now betting on such a move as it cuts costs through layoffs, shuts stores and exits international markets, while focusing on premium high-potency offerings in effort to attain profitability.
In anticipation of a federal nod, Canopy on Tuesday outlined a holding company structure to set up Canopy USA LLC, which it will own indirectly.
The new entity will take over Acreage in return for shares of Canopy Growth, fulfilling a $3.4 billion option that the Canadian company had taken in 2019. It will similarly take over Wana and Jetty, consolidating the three firms under a single ownership.
Canopy USA will have its own board of four directors with two of them designated by Canopy Growth. The deals, which need shareholder approvals, would see Corona-maker Constellation Brands Inc (NYSE:STZ) become a more passive owner of Canopy Growth.
Constellation owns around 35.7% of Canopy's common stock, which it intends to convert into exchangeable shares. The conversion would keep its stake unchanged, but it will give up rights to nominate directors to Canopy Growth's board.
Constellation could still choose not to convert its stake, in which case Canopy USA will not proceed with the deals.
Separately, U.S. cannabis REIT AFC Gamma Inc has amended its $100 million credit facility with Acreage to give it access to an additional $50 million.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.