Glass Lewis Endorses Canopy Exchangeable Shares

The TDR Three Takeaways for Canopy:

  1. Glass Lewis supports Canopy Growth’s plan to create exchangeable shares, enhancing U.S. market strategy.
  2. Canopy Growth’s proposed amendment could redefine its financial architecture and U.S. cannabis investment approach.
  3. The shareholders’ approval of exchangeable shares is pivotal for Canopy Growth’s accelerated entry into the U.S. cannabis market.

Canopy Growth Corporation (TSX: WEED) (Nasdaq: CGC), based in Smiths Falls, Canada, yesterday received a recommendation from Glass Lewis & Co., an independent proxy advisory firm. Glass Lewis has advised Canopy Growth shareholders to vote in favor of a resolution that would permit the creation of exchangeable shares. This initiative is a crucial step in the company’s strategic plans to penetrate and establish itself in the U.S. cannabis market.

This recommendation stems from a detailed review of Canopy Growth’s special meeting scheduled for April 12, 2024. The proposed amendment to the company’s incorporation articles would authorize the issuance of an unlimited number of non-voting, non-participating exchangeable shares. This move is designed to streamline Canopy Growth’s U.S. investment strategy, specifically by facilitating the acquisition of U.S.-based cannabis assets currently held by the U.S.-domiciled holding company created by Canopy Growth.

The strategy outlined by company, first announced on October 25, 2022, underscores the company’s ambition to accelerate its entry into the U.S. cannabis market. By establishing Canopy USA and transitioning its U.S. cannabis investments into this entity, the company positions itself to efficiently execute rights to acquire significant players in the U.S. cannabis sector, including Acreage Holdings, Inc., Mountain High Products, LLC, Wana Wellness, LLC, The Cima Group, LLC, and Lemurian, Inc.

Glass Lewis’s endorsement is particularly noteworthy given its role as an advisor to institutional investors worldwide. The firm’s support signals confidence in Canopy Growth’s strategic direction, highlighting the potential benefits of the exchangeable shares proposal. This proposal is not just a structural change but a strategic maneuver aimed at capitalizing on the U.S. cannabis market, anticipated to reach as much as US$50 billion by 2026.

The creation of exchangeable shares is poised to enable Canopy Growth and its U.S. subsidiary, , to work within the regulatory complexities of the U.S. cannabis market. This includes leveraging Canopy USA’s portfolio of leading cannabis brands and facilitating operational synergies across its U.S. holdings. Additionally, the proposed change promises to enhance Canopy Growth’s financial flexibility, allowing it to highlight the value of its U.S. THC investments more effectively.

As the deadline for voting approaches on April 10, 2024, Canopy Growth’s shareholders are encouraged to consider the long-term strategic benefits of the proposed exchangeable shares. The recommendation by Glass Lewis serves as a strong endorsement of the company’s vision and strategic direction, particularly as it seeks to leverage the opportunities within the U.S. cannabis market. Want to keep up to date with all of TDR’s research and news, subscribe to our daily Baked In newsletter.   

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