Canopy Shareholders Approve Acreage Deal, Legalization In Focus

Canada’s Canopy Growth Corp (NYSE: CGC) locked down its potential first-mover advantage in a wide-open U.S. cannabis market during a special shareholders meeting.

On Wednesday, 99% of Canopy investors voted to approve the company’s conditional acquisition of U.S. cannabis dispenser Acreage Holdings Inc (OTC: ACRGF) for $3.4 billion. The deal will only be executed if the U.S. legalizes marijuana on a federal level.

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Why It’s Important

Bank of America analyst Christopher Carey said Thursday the largest and most realistic U.S. pursuit for Canopy in the near term is the CBD market, but the Acreage deal gets Canopy’s foot in the door should the U.S. ultimately legalize marijuana.

“Acreage is a US-based cannabis company and as such will, upon changes to US cannabis laws, offer Canopy access to the cannabis channel, e.g. the channel selling THC-based products (note: even after federal laws change, we would expect THC-derived products to remain in the cannabis retail channel, barring a change to scheduling of THC on the Controlled Substances list, which we do not view as imminent),” Carey wrote in a note.

In the longer term, Carey said Canopy is well-positioned to be a leader in the global cannabis market given its size, its capitalization and its aggressive mindset.

What’s Next

The Acreage deal is expected to be finalized on June 27. Canopy investors will be watching to see if and when the company makes its next acquisition as it expands its business. In the longer term, investors will be following all the political action in the U.S. as the legalization movement pushed for the U.S. to follow in Canada’s footsteps and approve recreational marijuana nationwide.

Canopy Growth traded around $43.05 per share at time of publication.

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