BY DR. LLOYD COVENS
“Entrepreneurs are not super-employable,” claimed Bruce Linton, just a few hours after getting fired at the company he founded. “This is a big boys’ game,” noted Linton in his post-firing phone interview with CNBC’s Squawk on the Street, July 2nd, telling the network he still planned to hold on to his 18Mil. shares of Canopy Growth Corp. valued at over $700Mil. on the day he was canned.
Starting CGC in 2013, Linton and co-founder Mark Zekulin had grown the stock 1900 percent, and brought stock market credibility to the entire sector, including first MJ firm on at the New York stock exchange.
The 7-person board of directors- now with four named by $3.2Bill investor Constellation Brands–just could not stomach the $257Mil. loss for the quarter ending March 2019. Gone from the new Constellation team is former CEO Rob Sands who engineered the 2017 multi-billion-dollar investment which catapulted Canopy to the top of the cannabis global lineup.
Last month, Constellation named Mike Lee the new chief financial officer for CGC, and the leader of Canadian operations, Rade Kovacevic was named CGC president. After Zekulin helps the board find a replacement for Linton, he too plans to leave the firm.
Now acting as a de facto direct line to Constellation, Lee knows the liquor business well, working at Gallo Winery, PepsiCo and Constellation, where he was Senior Vice President for the company’s wine-and-spirits division. As a true CPA (Univ of Michigan and Cal State) and bean-counter, Lee replaces Linton as the keynote fireside chat at this months’ NCIA national expo, July 23 in San Jose.
“It Won’t Be in Canadian Cannabis”
The quick board of directors meeting=– called without Linton’s involvement– spelled doom for the chatty CEO, who was summarily removed from CGC’s chairmanship, co-CEO position and even his lead capacity at Canopy Rivers–a holding company for 14 other CGC subsidiaries and affiliates.
When asked about returning to an MJ executive assignment in the future, “It won’t be in Canadian cannabis,” Linton quipped.
In firing Linton, the Constellation crew may have cleared one or more obstacles from a Linton non-compete- at least freeing him to explore more “big ideas” at a U.S. or European MJ giant. Linton called his Constellation firing package “a gratuity,” hinting it may have equaled two years pay. But his spirit remained buoyant in a series of financial cable news interviews, repeating that he thinks Canopy is on solid ground as a long-term investment.
“Maybe they will find someone even better,” noted Linton, considered one of the best strategists within the entire cannabis sector. The Melissa Lee segment which welcomed Linton’s 11-min. phone call also found Shark Tank’s Kevin O’Leary and former short-term Trump communications director Anthony Scaramucci on the CNBC set, with both asking Linton some questions. See the full interview here.
CNBC’s Jim Kramer, a frequent reporter on cannabis stocks, pointed to the continued impact of Constellation on the entire sector. “Look, Canopy is the proxy. Canopy, it has the war chest…Only Cronos has a similar war chest. Cronos is a very good company. And so, what happens is if you have that kind of money, you’re going to dominate. And he was, I mean, look, the revs were good, but he was spending way too much and Constellation’s a very rigorous company. Constellation knows that beer, that wine was going away,” explained Kramer.
Linton told CNBC that his remaining two picks for investors looking beyond Canopy would include Canadian licensed producer, Organigram, and also the diversified holding company he founded, Canopy Rivers.
As High as Half the Entire Liquor-Consuming Market
Generally, the liquor industry is fearing a direct transfer of customers turning to cannabis to replace their “relaxation” preference away from alcohol. The appeal of cannabis versus booze for light-to-moderate beer, wine and spirits consumers could be as low at 18 percent of adult consumers–to as high as half the entire liquor-consuming market over time.
Following the July 2nd firing, New York Senator Chuck Shumer called Zekulin over the CGC prior-plan to invest $100 to $150Mil. into construction of a world-class hemp processing/manufacturing business park in Broome County, New York. Schumer said the company committed to keeping the facility rolling ahead to a possible opening this fall. However, other possible plans for Pennsylvania, Rhode Island and 2 or 3 other huge hemp processing centers were left uncertain.
Acreage Holdings (which reported its own $69Mil loss for 2018 operations) is one of the larger investments made by Linton and Acreage’s Kevin Murphy. With a final plan to acquire Acreage upon a future U.S. cannabis decriminalization (or passage of a federal STATEs act), some thought the $300Mil. cash outlay for the “option” was too expensive.
And Motley Fool chimed in that they felt the slow start for the legal Canadian adult-use market may be pushing formerly tight cannabis supply concerns toward an over-supply. That would place the cannabis inventory value– recently ramped up by a CGC estimate– dangerously positioned to add further red ink to the Constellation/Canopy balance sheet.
On global expansion, Motley Crew’s analyst Cory Renauer, was equally strident: “Anybody who thought marketing licensed cannabis in the European Union or South America would be any easier than it is in Canada must be unfamiliar with the Netherlands and Spain. Despite heavy spending to enter international markets, sales outside of Canada during the first three months reached just $1.8 million Canadian dollars, which was even less than during the previous quarter.”
–Based in Denver, Dr. Lloyd Covens, DBA is a seasoned cannabis industry journalist and the publisher of West420 NewsWeekly. Writing his doctorate on diffusion of innovations, Covens has been an expert journalist/researcher for 20 years chronicling new technology, global television and renewable energy advancements. He has reported on developments in the cannabis and hemp industry with weekly reports since 2014 covering the western U.S. for legal medical cannabis, recreational sales and hemp production. Covens is also the creator of the annual CO Hemp CBD conference held in Pueblo, Colorado.