Wednesday, Aug 15th 2018

Investment in WEED

Update

The fact that STZ is making a prescient investment in WEED this early shows they understand this trend

Constellation Brands announced it will invest an additional $4B in cannabis company Canopy Growth (WEED), increasing its ownership to 38%, with the option of buying more shares to achieve 50%+ ownership in coming years.

STZ is acquiring the new shares in WEED at a price of 48.60 CAD per share, which is a ~50% premium to the closing price on August 14th. This transaction is expected to be accretive to the company’s full year earnings in 2021.

As a result of the new shares Constellation is acquiring, Canopy Growth will immediately upon closing have proceeds of approximately $5B CAD ($4B USD) to bolster its leadership position in the global cannabis industry.

STZ remains committed to its investment grade rating and therefore, has no plans to engage in mergers, acquisitions or share buybacks until the company returns to its 3.5x leverage target, which is expected to occur within 18-24 months of deal closing.

Why is the stock down on this news? Some investors are disappointed that the company paid a 50% premium for ownership in a weed company -- cash that could've been spent on other beer acquisitions or share buybacks.

We disagree. We think cannabis represents a massive secular growth opportunity in North America, and it is a strategic fit with the alcoholic beverage giant. Instead of alcohol, many consumers will opt for cannabis in coming years.

From CEO Rob Sands: “This is potentially one of the most significant global growth opportunities of this decade." Canopy will use the capital to build or acquire assets. There are about 30 countries currently considering legalizing medical marijuana, with many more expected in the future.

The fact that STZ is making a prescient investment in WEED this early shows they understand this trend and took the opportunity to buy more of this strategic venture at a discount to what it would cost in a few years' time.

As of this writing, STZ was a portfolio holding of Titan. This security may cease to be a portfolio holding at some point in the future.
Back to Research ↗

Learn with titan

Investment articles and resources

Become the smartest investor you've ever been through straightforward, easy-to-read investment articles.

What Is Socially Responsible Investing (SRI)?


What Are Fractional Shares & How Do They Work?


What Is Dividend Per Share and How Is It Calculated?


What Are Employee Stock Options & How Do They Work?

Let's Get Started

Ready to become a client?

Create an account with us in two minutes.

Or scan to get the app

We're building the best investment platform, ever

Titan Global Capital Management USA, Inc ("Titan") is an investment adviser registered with the Securities and Exchange Commission (“SEC”). By using this website, you accept our Terms of Use and Privacy Policy. Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities. Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections are hypothetical in nature and may not reflect actual future performance. Account holdings are for illustrative purposes only and are not investment recommendations. The content on this website is for informational purposes only and does not constitute a comprehensive description of Titan’s investment advisory services.

Refer to Titan's Program Brochure for more information. Certain investments are not suitable for all investors. Before investing, consider your investment objectives and Titan’s fees. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested. Brokerage services are provided to Titan Clients by Titan Global Technologies LLC and Apex Clearing Corporation, both registered broker-dealers and members FINRA/SIPC. For more information, see our disclosures. Contact: 508 LaGuardia Place NY, NY 10012. Information provided by Titan Support is for informational and general educational purposes only and is not investment or financial advice. Check the background of these firms on FINRA's BrokerCheck.

© Copyright 2022 Titan Global Capital Management, Inc. All Rights Reserved.