Wednesday, July 24, 2024

Does Canopy CEO Ousting Signal Positive Or Negative Sign For Marijuana Industry?

When Bruce Linton was fired as CEO of Canopy Growth last week, it sent considerable shockwaves through the cannabis industry. Canopy appears, after all, like one of the more stable big name marijuana companies in North America. But Constellation Brands—the alcohol giant that owns 36% of Canopy and represents a majority of the company’s board—didn’t feel Canopy was moving fast enough to profitability and marijuana producer’s diminishing margins probably didn’t help either, as the Financial Post first noted.

Linton, to his credit, has taken his dismissal in stride. He admitted to a clash in views with Constellation on how to run the company, in an interview with Bloomberg TV.

“I don’t love this outcome but it’s not necessarily wrong for the company,” Linton said. “I think they’ve earned the right and deserve the right to have more decisive input as to how it’s run.”

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We won’t fully know if Linton’s firing serves as a watershed moment for the cannabis industry writ large or just an individual blip between investors and management. Linton’s contract included a non-compete agreement in the Canadian market, so we won’t see him resurface anytime soon north of the border. But comments by the former CEO suggest that he nor anyone else should try to become a player in the Canadian marijuana sector anytime soon.

“Anybody who’s dumb enough to launch a new cannabis company in Canada, I don’t know what they’re doing, they should have been at it six years ago. Canada is done,” Linton told Bloomberg. “You’re going to end up with a few winners and a whole bunch of people who wonder why they started.”

That isn’t exactly a ringing endorsement. Does this mean Canada’s position as a fertile ground for marijuana business is over? Not exactly. CNBC’s Jim Cramer said investors should be buying, not selling, Canopy stock following the news of Linton’s termination. While Linton helped build Canopy into what it is today, Cramer says the next CEO can take it even further.

RELATED: Did Canada Blow Its Chance To Be The World Cannabis Leader?

“He was spending a fortune. There was no plan to make money under Bruce,” Cramer said. “Constellation was very unhappy with Bruce,” he added. “The numbers weren’t there.”

Some have suggested this move represent a necessary step toward maturation for the cannabis industry. Others, however, expressed that marijuana businesses should reconsider partnering with major beverage brands, unless they want to experience a similar fate to Linton. We won’t know which is right until several months down the road. But one thing’s for sure—all eyes will be on Canopy to see what happens next.


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