Canopy Growth Corp.’s U.S.-listed stock rose 7% Monday after the Canadian cannabis company outlined its latest steps to enter the U.S. market while complying with Nasdaq listing requirements.
The company said it has filed a revised proxy statement with the U.S. Securities and Exchange Commission updating its strategy to accelerate entry to the U.S. cannabis industry through a U.S.-domiciled company called Canopy USA LLC.
Canopy USA LLC will house the companies in which it has options that would give it full control should cannabis be legalized at the federal level, namely Acreage Holdings, Inc., Jetty Extracts and Wana Brands.
has long aspired to access the U.S. market and take advantage of far greater opportunities than are available in its native Canada, where it continues to post heavy losses. But with federal legalization apparently still some way off, it has come up with a plan to fast-track that goal.
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Last October, the company thought it had a plan that would pass muster with U.S. regulators, but the Nasdaq objected to its intention to consolidate Canopy USA’s earnings into its financial results.
The idea was for a hands-off setup, in which Canopy USA would have its own board and for Canopy Growth and majority shareholder Constellation Brands Inc.
to surrender voting rights by converting their stock to exchangeable shares.
Canopy said it would now modify the structure to that it holds no more than 90% of Canopy USA, will adjust the composition and nomination rights of Canopy USA’s board of managers, and make other amendments. The changes mean it will no longer require the consolidation of Canopy USA’s numbers into its results.
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“Canopy USA is a novel strategy designed to capitalize on a once-in-a-generation market opportunity,” CEO David Klein said in a statement. “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 U.S. cannabis market is expected to be a more than $50 billion market opportunity by 2026, said Canopy.
“Canopy USA’s portfolio includes some of the most recognized, iconic cannabis brands in the U.S. that Canopy Growth believes are ideally positioned in the fastest-growing categories, such as edibles, vapes, and flower,” said the statement.
Canopy is now planning to hold a shareholder meeting once the SEC has reviewed the modified proxy to vote on authorizing an amendment to its articles of incorporation. That will allow it to create the class of non-voting exchangeable shares in the capital of Canopy Growth.
The stock is down 45% in the year to date, while the AXS Cannabis ETF
has fallen 26% and the S&P 500
has gained 9%.