Canopy Growth $CGC and Why You Should Be Bullish After the CEO Unexpectedly Stepped Down
Wednesday morning, July 3rd, we got some jarring news from Canopy Growth Corp. One of the Co-CEO was stepping down immediately. No transition plan, no “he’s moving on to the board”, just the headline “ Canopy Growth co-CEO Bruce Linton stepping down, Mark Zekulin remains CEO” with no other details. Not surprisingly, the stock fell immediately.
Stocks predictably drop when there is abrupt management turnover. The most recent example I can think of is Cloudera $CLDR CEO Tom Reilly resigning and the stock dropping 40% (yes 40%). Although sometimes stocks do respond positively, as in when Nevro $NVRO abruptly dropped its CEO Rami Elghandour to pick up D. Keith Grossman who was a known turn-around specialist (stock popped 20% on the news).
So which way would Canopy Growth go? First, we needed to find out what happened. And as luck would have it, newly-ex-CEO Bruce Linton happened to call into CNBC and explained what happened. TLDR: he was fired.
In the interview (LINK) Bruce talks about how when they accepted the $4.5 billion investment from Constellation Brands, they also accepted the possibility of being replaced, as the company had new challenges of scale that the original founders may not be fit to solve (he said the other Co-CEO was going to be replaced in the near future also). In general, he sounded upbeat, and happy, and managed to spin his firing into a good thing for the company. He still has vast swaths of wealth tied up in Canopy stock and is vested in Canopy’s future.
In June, Canopy Growth had some not-great earnings which dropped the stock 10%. They was a large reduction in year-over-year sales in medical and recreational cannabis. I believe that the new board members are addressing this problem are trying to right the ship. And I think most investors agree.
Here’s the tweet I put out 30 minutes before the market opened.
Here’s how the stock performed throughout the day.
We covered Canopy Growth in the premarket show on the morning the news broke.
If you like this type of content, or are looking to find out what’s going on at a glance in the premarket, please visit https://www.behindthebid.com
Originally published at https://www.behindthebid.com on July 5, 2019.