Canopy considers REIT to fund expansion

• Canopy Growth Corp. is assessing ways to raise non-equity financing as the world’s largest cannabis company seeks to expand and become profitable, according to its new chief financial officer.

“We’re going through a process of just digesting the multiple options that we have in front of us, and comparing that to our business plans over the next few years,” Mike Lee said in an interview. “We’re trying to be smart about it and build a capability that can ramp up as we put more fixed assets in place.”

While setting up a real estate investment trust is an option, there are other alternatives including a secured financing, said Lee, who joined Canopy from Constellation Brands Inc. and will become permanent CFO when he receives the necessary security clearance from the Canadian government.

As Canopy considers its financing alternatives, it’s also focused on research and development, global expansion and getting its Canadian business to profitability, he said.

“We’re very clear that when it comes to Canada as a stand-alone business that we expect to be Ebitda positive in the next 18 months,” said Lee, who also wants to see the Canadian operations generate margins similar to consumer packaged goods companies. However, Canopy as a whole will likely generate negative earnings before interest, taxes, depreciation and amortization for the “foreseeable future.”

Canopy needs to fund its expansion into the U.S. and European markets as the legalization of cannabis boosts consumer spending on a variety of marijuana-based products. It’s aiming to have hemp processing facilities in seven American states within the next 12 months, chief executive Bruce Linton said last week.