Canopy Growth (CGC) soared Monday on the news Constellation Brands (STZ) CFO David Klein will become CEO of troubled Canadian cannabis producer Canopy. Other marijuana stocks also got a lift.
It tightens the grip that beer, wine and spirits maker Constellation has on the pot producer, which has been suffering steep losses. Klein was made Canopy Growth chairman in October after Corona beer maker Constellation Brands sustained a big loss on its investment in the Canadian cannabis firm. He will formally take over as Canopy Growth CEO on Jan. 14.
“David is an experienced strategist with a deep understanding of how to build enduring consumer brands while leveraging operational scale across a dispersed production footprint,” Canopy Growth said in a news release. “He is a strong leader with a proven track record of developing diverse and high performing teams.”
The firm touted the new CEO's consumer packaged goods and alcoholic beverage industry experience, strong financial orientation, and experience operating in highly regulated markets in the U.S., Canada, Mexico and Europe.
Constellation Brands has sunk $4 billion into Canopy. It is looking to secure a position of strength in light of the proposed legalization of recreation marijuana in several countries. So far marijuana stocks have failed to deliver on the hype, with their shares plummeting as a result.
Klein will replace Mark Zekulin, who will also resign from the Canopy Growth board. Zekulin was a founding employee and served as president, co-CEO and finally CEO.
Zekulin took the latter role after Canopy Growth founder and co-CEO Bruce Linton was fired in July. His ousting came after Constellation Brands said it was “not pleased” with the firm's quarterly results.
Jefferies had a mixed takeaway about what Canopy Growth's new CEO coming from Constellation Brands. It sees “greater financial focus and commitment from STZ, though also negatives around potential lack of external appetite for the role, and the likelihood of a heavy focus on an unproven beverage category.”
Before joining Constellation Brands, Klein was CFO at baked goods firm Montana Mills. He helped lead the firm from private to public company, as well as its subsequent sale to Krispy Kreme (KKD). He was also chief financial officer at internet and network services startup NetSetGo.
In addition, Klein was previously director of mergers and acquisitions at Xerox (XRX), as well as director of finance and accounting for Harris, now part of L3 Harris Technologies (LHX).
Constellation Brands said senior vice president Garth Hankinson will take over Klein's CFO role.
Marijuana Stocks Get Lift
Canopy Growth stock jumped 14% to 21.29 on the stock market today. The bullish action allowed the stock to punch back above its fast-falling 50-day moving average for the first time since May. However it remains marooned far from its 200-day line.
CGC stock has a dire IBD Composite Rating of 9. Along with a miserable share performance, Canopy Growth has steep losses, which is why it has an EPS Rating of 17.
Meanwhile Constellations Brands stock fell 1.3%. It is trading below its 50- and 200-day lines. Its Composite Rating of 37 is also poor.
Among other marijuana stocks, Aurora Cannabis (ACB) rose 7.8%. Tilray (TLRY) climbed 5.5%, Cronos Group (CRON) 3.7% and Aphria (APHA) 7.6%.