Shares of Canopy Growth (WEED) fell 18% after the Canadian cannabis producer announced
plans to exchange debt for a combination of stock and cash.
The Smiths Falls, Ontario-based company’s stock dropped to a five-year low after announcing
that it has agreed to swap $255.4 million of debt for shares and $3 million in cash for accrued
and unpaid interest.
The deal will see Constellation Brands (STZ), one of the largest shareholders in Canopy
Growth, acquire an additional 21.9 million to 30.7 million of stock in the cannabis company at a
cost of $2.50 U.S. to $3.50 U.S. per share.
Constellation Brands, which is based in the U.S. and specializes in alcohol production and
sales, currently has a 36% stake in Canopy Growth. After the deal is concluded, Constellation
Brands’ stake will grow to more than 40%.
The deal to exchange debt for stock and cash comes as analysts have lowered their price
targets on Canopy Growth’s stock and investors flee the cannabis sector.
Canopy Growth’s stock has fallen 67% this year to $3.66 per share, making it one of the worst
performers in the Alternative Harvest exchange-traded fund (ETF), known by the ticker symbol
“MJ,” that tracks cannabis stocks and is down 48% year to date.
