Canopy Growth Files Revised Proxy Statement to Accelerate Entry into U.S. Cannabis Market
LOS ANGELES– Canopy Growth Corporation, aNorth American cannabis and consumer packaged goods (CPG) company, announced today the filing of a revised proxy statement with the U.S. Securities and Exchange Commission (SEC). The statement outlines the company’s updated strategy to expedite its entry into the rapidly growing U.S. cannabis industry through its U.S.-domiciled holding company, Canopy USA, LLC (“Canopy USA”).
Upon receiving shareholder approval for the creation of a new class of non-voting exchangeable shares in Canopy Growth’s capital, Canopy USA is poised to exercise its rights to acquire several prominent cannabis entities, including Acreage Holdings, Inc. (“Acreage”), Mountain High Products, LLC, Wana Wellness, LLC, The Cima Group, LLC (collectively referred to as “Wana”), and Lemurian, Inc. (“Jetty”).
To ensure compliance with NASDAQ’s listing rules, Canopy Growth has restructured its interest in Canopy USA, allowing it to avoid consolidating Canopy USA’s financial results with the company’s own financial statements according to U.S. accounting principles. However, the strategic advantages of Canopy USA’s formation remain intact.
One of the key benefits of this strategy is the acceleration of Canopy Growth’s entry into the world’s largest and fastest-growing cannabis market. With the U.S. cannabis market projected to exceed $50 billion by 2026, the company aims to capitalize on this immense opportunity by assuming complete ownership and control of its U.S. THC (tetrahydrocannabinol) portfolio once federal permissibility of cannabis is achieved in the United States.
Furthermore, Canopy USA’s portfolio boasts well-established and recognized cannabis brands, positioning it as an industry-leading premium-focused powerhouse. The company intends to leverage the strengths of each brand, particularly in the high-growth categories of edibles, vapes, and flower products. As more U.S. states legalize recreational cannabis, Canopy USA anticipates substantial growth and market expansion, creating value in the near term and setting the stage for a robust presence once federal permissibility is achieved.
In addition to market advantages, the consolidation of U.S. cannabis assets within Canopy USA is expected to generate revenue and cost synergies. By leveraging the brands, distribution channels, and operational capabilities of the entire U.S. cannabis ecosystem, redundancies among certain Structured U.S. Investments and the reporting costs of Acreage will be eliminated. This streamlining is projected to reduce operating expenses and logistical burdens associated with various investments, counterparties, and agreements, all while cannabis remains federally illegal in the United States.
While Canopy Growth will not consolidate the financial results of Canopy USA, the company remains confident in the value of Canopy USA’s U.S. THC assets. Following the acquisitions of Acreage, Wana, and Jetty by Canopy USA, the company plans to showcase the worth of these investments to its investors.
Commenting on the revised strategy, David Klein, Chief Executive Officer of Canopy Growth, expressed enthusiasm for the market opportunity presented by Canopy USA. He stated, “Canopy USA is a novel strategy designed to capitalize on a once-in-a-generation market opportunity. We are pleased to have found a path forward that enables us to stay within NASDAQ’s listing requirements while preserving the meaningful value associated with this plan.”
The agreed-upon structural amendments to Canopy Growth’s interests in Canopy USA include reducing Canopy Growth’s economic interest in Canopy USA to no greater than 90%, adjusting the composition and nomination rights of Canopy USA’s board of managers, and modifying the terms of the initial protection agreement.
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