The Canopy Growth stock split caused a lot of drama, and the stock has been going down steadily, but what are the reasons behind this? Let’s see why the Canopy stock is still 5% down since the beginning of the month.
Canopy Growth had a rather good month in July as they made new steps towards market domination in Canada.
But on paper, Canopy Growth stock (TSE: WEED) has been on a steady slump for the most of the month, and those are not the type of news you are hoping for if you are invested in this company.
So, let’s take a look at the company performance in the last month in an attempt to analyze why this is happening.
Canopy Growth stock split
Early in July, Canopy announced that they will be attempting a stock split.
Shareholders voted in favor of the stock split which will aim to divide the number of issued and outstanding common shares of the Corporation on the basis of a range between two-for-one and three-for-one, at the discretion of the Board of Directors.
This move is intended to increase the liquidity of the Canopy Growth stock, as it would mean that their stock would start trading at half or even a third of its current value, but it would also increase in volume meaning that more of the stock could be traded.
Some say that this split could focus the stock to go either way, but for now, we haven’t seen much-correlated impact ever since the announcement.
Supplying British Columbia
Canopy Growth was one of over 30 licensed producers that were awarded a contract to supply the most western province with recreational cannabis once the market opens up in October.
The Memorandum of Understanding with the BC Liquor Distribution Branch was made for 5,719 kg of high-quality cannabis products in the first 12 months after the legalization.
Canopy Growth is likely to enter some type of supply agreement with every province, as they already have some type of presence in most provinces already.
British Columbia will be a huge opportunity for Canopy to prove themselves in the West among the vast competition, as this province will be all about the quality of the product.
Canopy Growth has entered the BC market with the introduction of BC Tweed several months ago, and will be one of the largest greenhouse grow-ops in the province with up to 3 million ft2.
Canopy Growth to acquire Hiku Brands
Canopy Growth entered an acquisition deal with Hiku Brands, which formed as a result of a merger between DOJA Cannabis Company and Tokyo Smoke in December 2017.
This move was made to increase Canopy’s domination over the domestic market, as they continue consuming and integrating brands in their corporation.
After announcing the acquisition of Hiku Brands, Bruce Linton said the following:
“Hiku equals brands. Canopy is built on brands. So we combined them,” — a haiku by the Canopy Growth CEO and founder.
Hiku Brands also had an acquisition offer on table from another licensed producer, WeedMD, which they rejected after the Canopy proposal.
WeedMD has waived its “right to match” the proposal by Canopy Growth and thus the WeedMD deal has been terminated, and Hiku has paid a termination fee of C$10 million to WeedMD.
It is not certain yet if and how will this affect the Canopy Growth stock, but it is definitely something the shareholders will have to think about.
Operations in Latin America
Aside from dominating the domestic market, Canopy Growth also has great international ambitions.
Early in July, Canopy Growth announced the creation of another one of their subsidiaries, Canopy LATAM Corporation, which will be in charge of supplying and working with the Latin American countries in Central and South America.
Colombian Cannabis, holder of all required national licenses for the production, manufacturing, and export of cannabis derivatives has joined the Canopy Growth family as Spectrum Cannabis Colombia and will be operating under the corporate umbrella.
Colombia is not the only country in which Canopy Growth has interest, as they’ve announced that they will be also working with Chile and Brazil, among other countries.
Given that they’ve largely increased their footprint in Europe over the past year and a half, it looks like integrating themselves in the Latin American market is the next international move to make.