Published: Thu, August 16, 2018
Finance | By Loren Pratt

Canopy Growth marijuana stock surges after new Constellation stake

Canopy Growth marijuana stock surges after new Constellation stake

"Constellation gets it. This is happening globally", Linton told Quest, adding that Constellation can benefit by being the first to market with cannabis-based drinks while other beer and alcohol companies are still trying to figure out what to do in the market. Molson Coors Brewing Co. has started a joint venture with Hydropothecary develop nonalcoholic, cannabis-infused beverages for the Canadian market.

Spirits company Constellation Brands announced Wednesday it will significantly boost its investment in Canada's Canopy Growth in a big bet on the growth of cannabis-based products.

Global consumer spending on cannabis will hit US$32 billion by 2022, triple current levels, according to a report this week by USA research firms Arcview Market Research and BDS Analytics.

Under the deal, Constellation will nominate four directors to Canopy Growth's seven-member board of directors. But in as nascent an industry as cannabis, shares took a 5% hit on Tuesday when the province of Ontario, home of Canada's largest city, said it would delay the roll out of private retail stores. Canopy had a market value of $5.4 billion as of Tuesday.

Canopy, based in Smiths Falls, Ontario, has specialized in the medical product and doesn't now have operations south of the border.

United States drinks group Constellation Brands has poured an additional US$4 billion into Canadian cannabis producer Canopy Growth Corporation - the largest investment in the cannabis industry to date.

After Wednesday's deal, Canopy's Canadian shares jumped as much as 52 per cent to the highest since the stock began trading in 2010. Today is all about this morning's transformative announcement, which sends shock waves throughout the sector.

Herzog added "there is an expectation that marijuana will eventually be legalized in the U.S".

Hold onto your hats everyone, an absolutely epic Canopy Growth Corp (TSE:WEED) (NYSE:CGC) (FRA:11L1) fueled cannabis sector upswing is expected to kick-off in the next 60 minutes.

Canopy Growth CEO Bruce Linton told CNN's Richard Quest in an interview Wednesday that the deal gives Canopy more credibility.

Canopy, Canada's largest marijuana company by market capitalization, is also granting Constellation warrants, which, if fully exercised, will lift its interest above 50 per cent and inject another $4.5-billion into the Smiths Falls, Ont. -based producer.

"Over the past year, we've come to better understand the cannabis market, the tremendous growth opportunity it presents, and Canopy's market-leading capabilities in this space", said Rob Sands, chief executive of Constellation. Both companies said they have no plans to sell cannabis products anywhere unless it is permitted at all government levels.

Under the agreement, Constellation will acquire 104.5 million Canopy shares at a price of $48.60 per share.

But the marijuana market is relatively immature, so Constellation's investment is seen as a major endorsement of the industry.

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