Tuesday, September 27, 2022

Here’s What Canopy Growth Investors Need to Know About the Houseplant Deal

This morning, international cannabis giant Canopy Growth Corporation (TSX: WEED) (NYSE: CGC) welcomed a new Canadian cannabis brand called Houseplant to the company’s existing star-backed product lineup which includes Leafs by Snoop and more.

Founded by British Columbia-born comedian Seth Rogen and his childhood friend and screenwriter Evan Goldberg, Houseplant “has chosen each component of their offering to deliver the highest quality product to Canadians.”

With shares of CGC trading down over 4% in intraday trading following the news, many Canopy investors are left with a few questions unanswered.

How Much is Canopy’s Stake in Houseplant?

Canopy’s announcement notes that “through a minority ownership in the new business venture, Canopy Growth will help Houseplant scale quickly and support Houseplant’s long-term success.” This has left many wondering how large of a stake in Houseplant Canopy owns.

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According to a statement from Houseplant, “Canopy acquired 25 per cent of the business, and invested working capital,” but wasn’t willing to dive any deeper into the details.

Are There Any Other Cooks in the Kitchen?

In addition to Canopy, Rogen and Goldberg partnered with their talent reps, United Talent Agency, through its business ventures group.

Doesn’t The Cannabis Act Prohibit Endorsements?

Ever since Canada legalized adult-use cannabis in October 2018, Canadian licensed producers like Canopy are forced to abide by strict laws and guidelines regarding the marketing or promotion of marijuana products.

According to The Canada Press, “The Cannabis Act prohibits the promotion of cannabis, cannabis accessories or any service related to cannabis by means of a testimonial or endorsement or by means of the depiction of a person, character or animal, whether real or fictional.”

The Cannabis Act also makes it so that licensed producers may not “present cannabis or any of its brand elements in a manner that “evokes a positive or negative emotion” about a “way of life such as one that includes glamour, recreation, excitement, vitality, risk or daring.””

Lastly, and obviously, “any promotion that could be seen as appealing to young people is also forbidden.”

RELATED: NHL Alumni Association And Canopy Growth Partner On Marijuana Pain Relief Study

Houseplant clarified Rogen and Goldberg’s involvement, making clear that the two are real entrepreneurs and business-owners who have been decision-makers and business developers since day one.

The company said in an emailed statement to The Canada Press:

“Since inception the Houseplant team has maintained a strong focus on abiding by the regulations which is why, not due to a lack of opportunity both pre and post legalization, Seth and Evan have not participated in any cannabis related event or promotion in Canada. They are founders and owners, not spokespeople for the brand and have been very careful not to confuse that.”

What is Canopy’s Role in Houseplant’s Future?

Under the terms of the partnership, “Houseplant will lean on the production and distribution capabilities of Canopy Growth and its licensed subsidiaries to ensure an ample supply of Houseplant flower, Softgel, and pre-rolled formats are rolled out in Canada over the coming months.”

All of the Houseplant strains will be grown at Canopy Growth’s Smiths Falls, Ontario facilities, while Houseplant’s marketing and operational team are based in Toronto.

This story was originally published on Daily Marijuana Observer.



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