Constellation Brands and Canopy Growth Just Got Married
Constellation Brands produces beer, wine, and spirits in the United States, Canada, Mexico, New Zealand, and Italy. Constellation Brands, Inc. owns such brands as Corona, Svedka vodka, Arbor Mist, Wild Horse, among many other brands.
Canopy Growth Corporation, the largest publicly traded marijuana company, grows, and sales medical cannabis in Canada. Its products include dried flowers, oils and concentrates, softgel capsules, and hemps under brands such as Tweed, Black Label, Leafs By Snoop, etc.
Constellation Brands started dating Canopy Growth in October when they purchased a 9.9% equity stake in Canopy Growth for about $190 million. Then in June, Constellation Brands got engaged to Canopy Growth when they bought a third of the Canopy Growth's 600 million Canadian dollar convertible note offering aka debt, giving them the option to convert the notes into common stock. Then two weeks ago, Constellation Brands married Canopy Growth when they announced an additional $3.8 billion equity investment in Canopy Growth.
So why did Constellation Brands marry Canopy Growth? Constellation Brands is betting marijuana will be legalized around the world in the coming years. But how’s this for starters: RBC Capital Markets think estimates already suggest that the US category alone is $50 billion, which compares to spirits $58 billion, wine $65 billion, and beer $117 billion.
On Oct. 17, Canada will become the first G-7 country to legalize pot for recreational use. In the U.S., federal law still prohibits the drug, but states from California to Colorado have made it legal and its medical use is thriving.
Constellation Brands, Inc. isn’t the only company making this bet. Molson Coors Brewing Co. has a joint venture with Hydropothecary Corp. to develop non-alcoholic, cannabis-infused and Heineken has launched a brand specializing in non-alcoholic drinks infused with THC, marijuana’s active ingredient.
So what’s the play here? With a market cap of $40 billion and declining sales in beer, the play isn’t Constellation Brands, Inc. But I’m going to offer you an opportunity, just like early investors in Constellation Brands, Inc. had.
The play is Canopy Growth, who began trading on the New York Stock Exchange in May and currently has a market cap of $10 billion. This is an opportunity to get into the nascent marijuana industry now. Equally important, it’s an opportunity to get into Canopy Growth before Constellation Brands, Inc. buys the remaining 60% of the company within 18 to 24 months. However, wait for the pull back first.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
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by rollandthomas
I remember I used to own Canopy Growth when it was around $3.00. I got out at around $5.00. Anyway I wonder how much the marijuana industry will be affected with a major market crash?
Great question, I think the marijuana industry will sell off as well.