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Constellation Brands invests another C$245 million into Canopy Growth.
Last week, Constellation Brands subsidiary Greenstar Canada Investment Limited Partnership “exercised … an aggregate of 18,876,901 warrants to purchase common shares of Canopy Growth.”
In other words, on November 2, 2017, they locked in the right to buy these common shares at ~C$13 apiece. (While that’s around where shares are hovering now, this is a particularly low moment for the cannabis industry and the economy, generally.)
Constellation now owns 38.6 of Canopy’s issued and outstanding common shares. And if they wanted to go all in, with various warrants and notes, they could own 55.8%.
Bill Newlands, president and CEO of Constellation Brands, said in the announcement, “While global legalization of cannabis is still in its infancy, we continue to believe the long-term opportunity in this evolving market is substantial,” adding, “Canopy is best positioned to win in the emerging cannabis space and we are confident in the strategic direction of the company under David Klein and his team.”
As Cannabis Wire has reported, much of Canopy’s pre-investment executive team and board has now been taken over by Constellation. And Klein, who came from Constellation to replace Canopy founder Bruce Linton as CEO, has overseen significant layoffs and other cutbacks in order to fulfill “the new vision of the organization.”
4Front sells assets for cash.
Last week, US multistate operator 4Front announced that it would “sell its stake in retail licenses in Pennsylvania and Maryland” for a total of $18 million. But $10 million of that will go to repaying its debt to Gotham Green Partners. The company also raised $4 million from Navy Capital, which “was contingent on entering into the asset divesture agreements.”
4Front is one of several companies that have recently blamed COVID-19 for cutbacks, as Cannabis Wire recently reported.
The company, which is behind the Mission brand stores in a handful of states, including Illinois and Massachusetts, wrote in an announcement at the end of March, “given the ongoing uncertainty in the market and the economy due to Covid-19, the Company will suspend further formal guidance at this time. The Company expects to provide reinstated guidance for both 2020 and 2021 when it has more visibility into the operating environment.”
That same announcement had some rough updates, but they weren’t necessarily coronavirus-related: headcount reductions between 40-45% (both corporate and overhead for Mission shops), estimated to save $7-8 million a year; “Delaying projects that require significant capital expenditures with uncertain near-term benefits;” and “divestiture,” for $6 million, of the company that managed a Mission shop in Arizona.
The company noted that the headcount reduction was four months in the making, and that one of its delays, a manufacturing facility in California, was due to market factors in the state “prior to the COVID-19 pandemic.”
The future for Montana’s adult use campaign is up in the air.
Last week, a Montana court sided with the state after New Approach Montana sued to be allowed to collect signatures electronically in order to try to place adult use legalization on the November ballot. (You can read the court decision here.)
Attorney General Tim Fox, who argued in favor of the state, responded to the ruling with a statement:
“The District Court’s order is a victory for the rule of law and Montana’s constitution. I am pleased with the ruling because the court’s job is to interpret laws, not to write them or suspend them.”
Illinois adult use cannabis sales are up, but still below launch levels.
In April, adult use sales in the state hit $37.3 million, up from $35.9 million in March, and $34.8 million in February, but still below January’s $39.2 million. That was the month that adult use sales went live in the state.
From January to February to March product sales fell from 972,045 items to 831,600 items to 812,203 items, but then rose in April to 818,954 items.
Sales to out-of-state consumers rose from January to February, from $8,636,208 to $9,189,701. But then they fell in March to $8.8 million, and again in April to $7.5 million.
It is likely that slower travel due to coronavirus is a factor in the drop of sales to out-of-state consumers.
Toi Hutchinson, Senior Advisor for Cannabis Control to Governor JB Pritzker, also noted that “curbside pickup will remain an option for medical cannabis users to obtain the product they need through May 30.”
