Fans of what’s probably the most widely known and esteemed name in cannabis, Canopy Growth (NYSE:CGC), have been gearing up for the company’s upcoming earnings report. Slated for Nov. 14, Canopy’s big day is one of the industry’s most highly anticipated events, and traders have been taking positions in CGC stock and hoping for a big move.
The big move came earlier than expected, though, as Canopy Growth stock headed for the heavens after a celebrity endorsement was announced on Nov. 7.
It’s not the only endorsement we’ve seen in the cannabis niche, but it has garnered a lot of attention and could be the spark that CGC — and the broader cannabis industry — needs after a punishing third quarter.
CGC Stock Gets a Boost from a Hip-Hop Celeb
While opinions on the benefits and dangers of cannabis vary, I think most of us can at least agree that the marijuana industry’s growth is proportionate to its acceptance and adoption into mainstream society. The University of Washington’s Sean M. O’Connor and the University of Missouri’s Erika Lietzan explain in a research study how this particular market’s success depends not only on the decriminalization of the product, but also on the public’s perception of marijuana as an accepted part of the culture:
“This industry is enormous, with estimates into the billions of dollars of annual revenues. Along with this economic opportunity, one of the selling points of legalization for voters is that an illicit and often dangerous underground industry will be transformed into a safe and well-regulated one.”
One of the most direct methods of moving cannabis from a fringe drug to a mainstream medicine is through celebrity endorsements. And among millennials, you’d be hard-pressed to find a more popular figure than
Drake, a famous rap star with an estimated net worth of $150 million in 2019.
After losing its CEO, Bruce Linton (who, it could be argued, was a celebrity in his own right), Canopy needed some star power and CGC stock needed some firepower. Last week, the company delivered a much-needed shot to the arm for the cannabis market when it announced that Drake had used funds from his personal fortune to purchase 60% of More Life Growth Company, while Canopy Growth owns the other 40%.
A Star-Struck Industry?
Granted, we’ve seen celebrities jump into the cannabis-market fray before: Snoop Dogg, Seth Rogen and Martha Stewart have all worked with Canopy, while Jay-Z, Melissa Etheridge and Whoopi Goldberg have embarked on cannabis-related ventures with different companies.
Those are all big names, to be sure, but Drake has a loyal and sizable following among millennials that’s bound to make a lasting impact. Just as importantly, More Life Growth Company is already fully licensed by Health Canada (the nation’s regulatory entity) to cultivate, process and sell cannabis. In other words, Drake and Canopy picked a solid, market-ready company to get behind.
And before you project your preconceived notions on a rap star, be advised that Drake is a sophisticated entrepreneur with a talent for branding. Plus, he clearly recognizes the growth prospects of the Canopy partnership: “The opportunity to partner with a world-class company like Canopy Growth on a global scale is really exciting … The idea of being able to build something special in an industry that is ever growing has been inspiring. More Life and More Blessing,” he stated in a press release.
Canopy’s current CEO, Mark Zekulin, expressed optimism in what he envisions as an enduring collaboration with the hip-hop entrepreneur: “All in all, we couldn’t be more excited to partner with Drake to bring his vision for the More Life Growth Company to global cannabis markets … We anticipate a long, successful, and mutually beneficial working relationship.”
The Bottom Line on CGC
Mark my words: over time, this will prove to be more significant than previous celebrity endorsements in the cannabis sector. When arguably the biggest cannabis company and the most influential rapper combine forces, CGC stock has no upper limit and the legalized marijuana market will start to resemble hip-hop music: once neglected, but now accepted.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.