If any medical marijuana company was ever going to make the leap to the big board in Canada, it was going to be Canopy Growth Corporation (CGC.V – for now), formerly Tweed.
From the outset, Canopy has had first mover advantage for everything. It was first to list on the Venture, first to grab at the fat money looking to pile into the weed business, first to get institutional support, first to get Americans buying into Canadian weed tickers, first to get an ‘in’ with the federal political party that would duly sweep to power and (soon) liberalize weed laws.
It was first to get a second license. First to acquire a competitor, in Bedrocan. Also, first to get in trouble with the cops. First in number of consultants brought in to try to fix a grow. First in negative customer feedback early on.
But a big war chest will forgive a lot, and though being first more sure helped Tweed/Canopy along, one can’t ignore the fact that being first mover in the first place takes contacts, knowledge, business acumen, and execution.
Canopy had more problems than anyone else, jumping off the line to build what was then the biggest weed grow anywhere, in a building that wasn’t suitable for weed grows until a lot of money was spent.
Canopy was able to use its position to stay ahead of the pack. When the chocolate factory wasn’t working out for young plants, they managed to get a quick license for a greenhouse to grow the young’uns in. When the cops took one of their shipments, they were able to shrug and register it as a loss without financial devastation. And when Bedrocan threatened to become the more respectable corporate outfit, Canopy just bought that company, paying above the odds without a hesitation.
It makes sense that they would be the ones to move up to the TSX, because just like many TSX listed companies, Canopy is able to raise big money to do big things because they’re big.
Yes, they’re overvalued when you look at their financials, and yes, they don’t have the products that will become synonymous with artisan quality. But they’ll grow, and take advantage of new opportunities before others, because they have a war chest and connections and assets.
Canopy, when full recreational weed comes, will go on a buying spree. While competitors will look to be the one that Big Pharma or Big Tobacco comes to acquire, Tweed will look to compete with Big Pharma and Big Tobacco on equal terms, and that’s always been the plan.
I was talking to a very well connected corporate cannabis insider a few days ago and posed the question, how much of what Canopy does is down to business opportunity, and how much is just to maintain the ‘we’re bigger than everyone else’ profile, and was told, while obviously opportunity is key, the latter part of that question plays a big part in strategy.
If you’re big, you can get bigger more easily. And if you’re perceived as being big, the meagre revenues coming in at the quarterly checkups matter less and less.
Amazon doesn’t make a huge swathe of profit. But it’s Amazon, and it owns all retail, so people buy in. There’s safety in numbers and Canopy has large numbers of investors who just don’t care that the stock price isn’t moving. Because maybe one day it will, by default.
In real world terms, the move up to the TSX doesn’t mean much at the pointy end. Will banks invet in Canopy that wouldn’t when they were on the TSX? Maybe, but not likely. At it’s core, Canopy still doesn’t have that growth profile you’d want in a blue chip stock.
But it’s closer. If it acquired long time target Peace Naturals, it’ll be closer still. If it came after Aurora or Mettrum or Whistler, closer still. If it starts to open up edibles and oils as real markets, closer still. If it gets permission to open retail outlets (rather than dispensaries), closer still.
Canopy has always been first. Yesterday’s news is just reinforcement that such will always be the way, as long as that war chest remains stuffed.
— Chris Parry
http://www.twitter.com/chrisparry