When it comes to the cannabis industry, the only real debate seems to be around how big it’s going to get. Modest estimations put the industry at $40 billion by 2024. And there are few cannabis companies that catch the eye of investors quite like CGC stock.
But Canopy Growth (NYSE:CGC) hit a snag last week after it came out that the former CEO and co-founder Bruce Linton was fired. The company issued a press release saying that Linton has stepped down from his role as CEO and from the Board of Directors. Then in an interview with CNBC, Linton revealed that he was fired.
Many investors were surprised to learn that Linton was let go, but this doesn’t change the fundamentals of the company. Canopy Growth is still one of the most valuable cannabis stocks in Canada. Here are three reasons why Linton’s firing was good news for CGC stock:
The Numbers Just Weren’t There
Linton did many things right during his run at Canopy. He secured a $4 billion investment from Constellation Brands (NYSE:STZ) and oversaw a number of important acquisitions.
However, when Constellation Brands made this investment, it earned a 37% stake in the company. It also earned the right to nominate four members to the six-member board. And when Canopy Growth reported losses of C$98 million during its fiscal fourth quarter, this hurt Constellation’s bottom line as well.
According to Constellation’s fiscal first-quarter results, the company reported losses of $54.4 million tied to Canopy Growth. Going forward, Constellation Brands will likely find a replacement that is more interested in improving Canopy’s bottom line.
CGC Stock Is Ready for New Leadership
Canopy’s recent financial performance probably had a lot to do with Linton’s firing. But the company may also be looking to transition to new leadership, which isn’t uncommon for a maturing company.
After all, it takes a different skillset to build a company than it does to run a billion-dollar global brand. According to the press release, Mark Zekulin will act as sole CEO of the company while the board looks for outside leadership.
This seems to indicate the company is looking for a new leader going forward, not Zekulin or another co-CEO. The company needs to prove it can find the right person to build on Canopy’s momentum going forward.
The Cannabis Industry Is Changing
Linton’s firing will result in a major leadership change going forward. The change caught most investors off guard and the company’s shares dropped roughly 5% that day. However, the stock quickly rebounded.
After all, Linton is not the first CEO to be ousted from a cannabis company he founded. Aphria (NYSE:APHA), CannTrust Holdings (NYSE:CTST), and Organigram Holdings (NASDAQ:OGI) all replaced their original CEOs with more seasoned management.
The cannabis industry as a whole is changing as it moves from its entrepreneurial beginnings to becoming a major consumer products industry. As the industry continues to change, investors will begin holding these companies to a different standard where profitability is the biggest determination of success.
As of this writing, Jamie Johnson did not hold a position in any of the aforementioned securities.
