Canopy Growth’s co-chief executive Linton out amid widening losses
TORONTO — Canopy Growth Corp.’s co-chief executive Bruce Linton, who grew the Canadian cannabis company into the largest in the world, is out, the firm said in an abrupt announcement on Wednesday.
The Smiths Falls, Ont., company announced Wednesday that co-chief executive Mark Zekulin will become the sole CEO, effective immediately, and will work with the board to begin a search to find a new leader to guide the company in its next phase.
Linton, who also stepped down as chair and a director of Canopy Rivers Inc., has been the public face of the company as it has grown into a leader in the cannabis industry.
“Creating Canopy Growth began with an abandoned chocolate factory and a vision,” Linton said in a statement. “The board decided today, and I agreed, my turn is over.”
Linton noted that he had “full confidence in the team at Canopy.”
Shares of Canopy were down by more than 4 per cent on the Toronto Stock Exchange in early trading but recovered some gains to $51.50 by late morning, down by nearly 2 per cent. Canopy Rivers’ stock on the Venture exchange was also down by roughly 3 per cent to $3.00 in late morning trading.
Canopy was founded in 2013 and recently received a $5-billion investment from Constellation Brands, the massive alcohol company whose brands include Corona Beer and Kim Crawford Wines.
The announcement comes after Canopy Growth last month reported a wider-than-expected fourth-quarter net loss attributable to shareholders of $335.6 million, or 98 cents per share, despite a jump in net revenue to $94.1 million that beat market estimates.
In reporting the results, Linton said Canopy invested heavily during the quarter for longerterm growth, such as boosting its production capacity and preparing for the launch of edibles and other next-generation pot products once legal later this year.
Constellation Brands, Canopy’s biggest shareholder, said last week that it was “not pleased” with Canopy’s recent year-end results as it recorded a loss in its own financial first quarter in connection with its stake in the Canadian cannabis company.
With Constellation’s vocal disappointment with Canopy’s earnings, the move is not surprising, Cowen analyst Vivien Azer said Wednesday.
“The magnitude of losses for WEED (Canopy) has expanded far more than we had expected, and while we commend Linton for his vision in establishing the world’s leading cannabis company, we believe new leadership will be a welcome change,” she said in a note to clients.
Constellation said it fully supports the board’s decision to appoint Zekulin as the company’s chief executive.
“Mark has played an integral role in the company’s success since its inception, including managing all aspects of the company’s day-to-day operations. He is committed to helping ensure a successful transition, as Canopy begins a process to identify a leader to drive the company’s vision going forward,” a company spokesperson said in an emailed statement.
“The future of Canopy Growth remains very bright and we look forward to the company’s continued success for many years to come.”
RBC Capital Markets analyst Douglas Miehm said he expects Canopy’s shares to come under pressure on the “rather abrupt news.”
“Mr. Linton has been at the forefront of Canopy and a figurehead for the industry, and thus we view the announcement as surprising,” he wrote in a note to clients.
“In our view, Mr. Linton had set relatively high expectations in the market ... We believe there may have been a disconnect between the near-term execution sought by Constellation at this point and Mr. Linton’s focus on investing for the longer term, often at the expense of short-term performance.”
In a statement, Zekulin said, “I know the company will continue to thrive as the Canopy story continues on for years to come.”
As part of the change, Rade Kovacevic, who has been leading the company’s Canadian operations and recreational strategy, was named president.
The board also appointed John Bell to replace Linton as chair. Bell has served on the board as lead director for five years.