Canopy Growth announces changes to its Board of Directors

Canopy Growth is not growing. The Canadian cannabis company reported a 4th quarter loss of C$578 million, culminating in a C$4.1 billion loss since 2015. Compared to the previous quarter, revenue crashed. Net sales are down 21% to C$111.8 million.

Overall, Canada’s recreational cannabis sales have dropped by 19% or C$39 million.

Compared to the Previous Quarter

Compared to the previous quarter, Canopy Growth is not growing. The company is down in flower and oil sales. But beverages, edibles and vapes remain unchanged. Canopy reported a 25% drop in revenue in the fourth quarter compared with last year’s same period.

Some critics blame its board of directors for being in over their heads. For example, during an earnings call, Canopy CEO David Klein recommended one of their cannabis beverages for the Memorial Day long weekend. Of course, you can’t buy Canopy’s cannabis beverages in the United States. And Canada doesn’t celebrate Memorial Day. Canada celebrated Victoria Day or “May Two-Four” the previous weekend.

Another prime example of why Trudeau’s legalization should have opened the market to BC Bud instead of corporate suits. Not only do BC Bud farmers know how to grow quality cannabis at a profit, but many of them are also actually Canadian.

Despite Canopy’s struggles, Klein remains the most compensated CEO in Canada, at $45 million. With a salary of over $280,000, much of his compensation comes from stock options.

Canopy Growth Not Growing Shares

Canopy Growth Not Growing
Canopy shares have dropped

Given Klein’s compensation in stock options, Canopy’s latest earnings should be sounding the alarm. On the NASDAQ, Canopy finished at US$4.88 a share before Memorial Day weekend. That’s a drop of 12%.

Canopy Growth is not growing north of the border, either. On the TSX, they closed at C$6.18 on Friday. And then they lost another percentage when the TSX opened Monday.

Canopy Growth saw its revenue drop by 35% on a year-over-year comparison. Net revenues weren’t impressive either, totalling a loss of C$111.8 million (US$87.6 million).

Investors have hit the sell button since this is well below analysts’ expectations.

CEO Wants to Remain “Asset-Light”

A common criticism of Canada’s LPs has been that they’re not selling cannabis but equity. Since Klein has taken over the CEO role, he’s favoured an “asset-light” approach.

That is at least the reasoning behind Canopy’s desire to buy a 75% stake in the California-based cannabis company Jetty Extracts. The deal will only go through when the US legalizes cannabis federally.

As Klein told shareholders, “I firmly believe in the strength and competitive positioning in the US THC ecosystem we’re building. Canopy’s unique model is poised for rapid growth and emphasis on prioritized markets with fast-growing categories, strong brands and a balanced operations footprint.”

Klein defended Canopy Growth not growing in this latest quarter. He said Canopy didn’t include Wana Brands’ sales in the company’s financial statements. Wana is the number one edibles brand in North America, but their relationship with Canopy, like that of Jetty Extracts, is not a done deal.