In this Trade To Black Podcast, TDR Founder Shadd Dales and lead financial writer Benjamin A. Smith interview Richard Carleton, CEO of the Canadian Securities Exchange (CSE). Richard rejoins the program to discuss the current state of U.S cannabis following Canopy Growth’s third quarter fiscal year 2023 financial results, and the rapidly evolving regulatory environment in crypto.
In the cannabis sector, the big news this week was Q3 financial results by Canopy Growth, which can best be described as ghastly. On a year-over-year basis, net revenue declined 28% versus Q3 FY2022, and 23% including divestiture of C3 and Canadian operations. Gross margin went negative overall (2%), which means Canopy’s collective business operations were losing money even before calculating regular operating expenses. For the quarter, net loss registered at a whopping $267 million, a 43.44% increase versus the comparable reporting quarter in 2022.
While Mr. Carleton had some select words about the situation at Canopy, he chose to focus on the U.S. cannabis market as a whole. And while U.S. cannabis operators are performing better on a comparative basis, some of the same industry headwinds holding back Canopy are apparent in the United States, such as the difficulty of establishing national brands.
To turn its business fortunes around, Canopy Growth will need to effectively enter the U.S. cannabis market, which is roughly nine-times the size of Canada in terms of aggregate population.
It is currently attempting to do so by establishing a U.S. holding company structure called Canopy USA, LLC, and assigning ownership of all its U.S. cannabis investments to Canopy USA. The new entity will enable it to exercise rights to acquire Acreage, Jetty, and Wana and consolidate the revenues to its balance sheet. Once complete, Canopy USA will have a presence in 21 states and access to consumers through more than 2,150 third-party retail distribution points.
In addition, Canopy USA controls a conditional ownership position, assuming conversion of its exchangeable shares and the exercise of its option but excluding the exercise of its warrants, of approximately 13.7% in TerrAscend Corp.
Richard Carleton also opines on the rapidly-shifting regulatory landscape in crypto, where the U.S. Securities and Exchange Commission (SEC) just warned Americans over the risk of including assets like cryptocurrencies in their self-directed individual retirement accounts (IRAs) as well as unregulated trading platforms posing as exchanges.
Click the embedded media player for more of our podcast with Canadian Securities Exchange CEO, Richard Carleton.
To view our previous Trade To Black Podcast, click here.