POT ECONOMICS

Regulations won’t stop Canopy Growth from U.S. expansion, says CEO

Mitchell Consky, BNN Bloomberg

After shareholders of Canadian cannabis company Canopy Growth Corp. voted in favour of a new exchangeable share structure, David Klein, chief executive officer of Canopy Growth, says doors are opening for what he calls a $50-billion sector. 

“Our share prices are up 65 per cent or so in the last three months, so, for me, we’re looking at this over the long term,” he told BNN Bloomberg in an interview on Monday. “I think the market is already recognizing the progress we’ve made.”

The new structure will enable Canopy’s larger entry into the American cannabis market under U.S.-domiciled holding company Canopy USA, a move that required regulatory adjustments in a cannabis system that previously prevented Canadian companies listed in the U.S. from operating on American soil. 

“The U.S. market is the biggest market in the world as it relates to cannabis, and it also has the best profit goals, so it was really important for us to have a business in the U.S.,” Klein told BNN Bloomberg, pointing to several investments Canopy has made in U.S. companies, including Wana Brands, Jetty Extracts and Acreage Holdings. 

“The point of the vote was really to allow us to merge those businesses together so they could operate as one,” Klein explained. 

“We were able to work through a structure with the regulators as long as we allow Canopy USA to operate as an independent company that allows our investors to have exposure to the U.S. market.”

Klein added that the Canopy USA infrastructure itself will be “a separate company that sits underneath the Canopy umbrella from an economic perspective.”

He also mentioned that the company is scouting for “constellation brands,” to move from Class A common stocks to exchangeable shares.

“What we bring to the table is exposure globally. We bring market access where we’re a top player in Germany,” he said. “We’ve shown a ton of growth in a market like Australia. And we’ve improved margins in Canada dramatically. And my view is that if you could be successful in Canada you could be successful in the U.S. markets.”

In a previous interview with BNN Bloomberg, Klein mentioned that Canopy has undergone a “significant transformation,” narrowing its EBITDA loss, with additional cost cuts of $54 million. He also pointed to three consecutive quarters of revenue gain in the Canadian market. 

Despite regulatory speed bumps, Klein said the cannabis sector remains full of hope.

“We fully expect that the U.S. legal market will hit US$50 billion,” he said. 

“It is taking longer for the regulatory regime to keep up with all of the market projections. But the cool thing for us about the Canopy USA structure is we don’t really require any further federal regulatory improvements in order for us to take advantage of that.”

To watch the rest of Klein’s interview with BNN Bloomberg, watch the video