Canopy heads down south

Source: Canopy Growth.

Canadian pot grower Canopy (+25.08%) has purchased three pot companies south of the border (Acreage, Wanna, and Jetty’s) to form a brand new American business arm.

What happened: Canopy has been planning to buy some of these companies for years but was holding off until the US decided to legalize marijuana at a federal level.

Canopy decided to move ahead with its US expansion without federal legalization after seeing its shares drop ~65% this year and losing ~$2.09 billion in a single quarter

But how to enter an illegal market?

Canopy isn’t breaking any federal laws (recreational pot is legal in 19 states), plus its largest stakeholders are shielded from direct involvement in case things go sideways.

Zoom out: Between 2018 and 2021, legal pot boosted Canada’s GDP by $43.5 billion, a far cry from early projections claiming it would bring in $22.6 billion annually

  • Major reasons for these missed expectations have been consumer fatigue from an oversaturated market and the continued resilience of black-market weed dealers.

Canadian cannabis companies that want to bloom fully have to break into the US. That requires legalization or measures (like the SAFE Banking Act) that eliminate other barriers.