CANOPY GROWTH CORP (OTCMKTS:TWMJF) Merits Investment from Constellation Brands (NYSE:STZ.B)


CANOPY GROWTH CORP (OTCMKTS:TWMJF) is on the receiving end of some major hardcore buzz thanks to a press release by a monster of the alcoholic beverage space, Constellation Brands (STZ) (NYSE:STZ.B). STZ announced on Monday that “it has signed an agreement to acquire a minority stake in Ontario, Canada-based Canopy Growth Corporation, a well-respected public company and leading provider of medicinal cannabis products.”

According to the release, “This investment and relationship is consistent with Constellation Brands’ long-term strategy to identify, meet and stay ahead of evolving consumer trends and market dynamics, while maintaining focus on its core total beverage alcohol business. Constellation has no plans to sell any cannabis products in the U.S. or any other market unless or until it is legally permissible to do so at all government levels.” This is obviously huge news for the whole cannabis space, but particularly TWMJF.

CANOPY GROWTH CORP COM NPV (OTCMKTS:TWMJF) is one of the bigger growers. The company produces and sells medical marijuana in Canada. It offers dry cannabis and oil products primarily under the Tweed and Bedrocan brands. It also sells its products through online.

According to company materials, “Tweed is the most recognized marijuana production brand in the world. It has built a large and loyal following by focusing on quality products and meaningful customer relationships. Tweed doesn’t just sell marijuana, it facilitates a conversation about a product we’ve all heard about but haven’t met intimately yet. It is approachable and friendly, yet reliable and trusted. As marijuana laws liberalize around the world, Tweed will expand its leading Canadian position around the globe.”

Also from their materials, “Bedrocan is the epitome of medical-grade cannabis. Bedrocan BV pioneered medical cannabis in Holland through decades of selection and refinement, leading to standardized, whole bud cannabis strains that patients can rely on. Bedrocan Canada supplies the same standardized strains to the Canadian market through exclusive licensing rights to the American continents, an arrangement it will also enjoy for all future genetic advancements. Due to its consistency over time, Bedrocan’s strains have been used in clinical research in seven European countries. That commitment to research didn’t stay on the east side of the Atlantic – Bedrocan Canada recently launched one of the largest clinical cannabis studies in the world, the EQUAL Study, to evaluate quality of life before and after medical cannabis use.”

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As discussed above, Canopy just received a major investment from a company that thrives on the adult beverage market – a market with clear overlap to the cannabis market for most relevant consumers.

“Canopy Growth has a seasoned leadership team that understands the legal, regulatory and economic landscape for an emerging market that is predicted to become a significant consumer category in the future,” said Constellation Brands President and Chief Executive Officer, Rob Sands. “Our company’s success is the result of our focus on identifying early-stage consumer trends, and this is another step in that direction.”

The point made in this quote is utterly crucial to understand: money just flowed in to give Canopy a market advantage because it was perceived as having knowledge capital in terms of navigating the “legal, regulatory and economic landscape for an emerging market”. We can rattle off a few other stocks that certainly fit this bill as well.

But more than anything, the stock is up because of legitimation: pros came in and did pro-level due diligence and then put money to work. That ends speculation that a company like Canopy is somehow a fraud on any level. We would guess short interest here likely got cut by about 90% today in the stock.

All in all, we’ve witnessed 32% added to share values of the name over the past month of action. This is emblematic of the stock. TWMJF is a stock whose past is littered with sudden rips. In addition, the stock has seen a growing influx of trading interest, with the stock’s recent average trading volume running greater than 140% above its longer-run average levels.

Earning a current market cap value of $1249.7M, TWMJF has a significant war chest ($116M) of cash on the books, which must be weighed relative to about $1.7M in total current liabilities. One should also note that debt has been growing over recent quarters. TWMJF is pulling in trailing 12-month revenues of $48.8M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 127.3%. We will update the story again soon as further details emerge. Sign-up for continuing coverage on shares of $TWMJF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!