Canopy Growth Corp (Canopy Growth Corp Stock Quote, Chart, News TSX:WEED) finally has the right man to lead it into the pot promised land, says one observer.
Weed investor Tim Seymour of Seymour Asset Management spoke to CNBC Monday after news broke that Constellation Brands CEO David Klein had been named CEO of flagging Canopy, which had ousted the effusive Bruce Linton in July and embarked on the search for a new leader while leaving president Mark Zekulin to hold down the fort.
Klein was predictably positive about the move.
“Canopy Growth sits at the forefront of one of the most exciting new market opportunities in our lifetime,” he said. “Thanks to the efforts of Mark and the entire team at Canopy Growth, no company is better positioned to win in the emerging cannabis market. I look forward to working with the team to build on the foundation that has been laid, to develop brands that strongly resonate with consumers, and to capture the market opportunity before us. Together we will drive sustainable, industry-leading growth that benefits employees, shareholders and the communities in which we operate.”
Seymour said this is the move he and the street were hoping to see, noting the 14 per cent bump in share price immediately following the announcement.
“David Klein has been very involved in this transition over the last six months, in fact he was named chairman back in November,” Seymour noted. “He was part of bringing other members of his team on board. The current CFO, Mike Lee, is also a Constellation veteran. For continuity’s sake this is a very exciting time, I think people were waiting for this moment.”
But Seymour cautions that Constellation is now setting out to fix a problem that was much of their own making.
“David Klein is someone who presided over one of the most profitable spirit companies, from the CFO’s chair,” the portfolio manager added. “If you think about Constellation Brands, this has been an emerging markets company in some sense in terms of where they found growth. Their foray into cannabis was something that was clearly very aggressive and you could make an argument they, like many folks, overbuilt capacity and went after assets. There was a bit of a land grab. And I think you have seen in the stock over the last six to nine months where this has been a painful reality check. The company may or may not have bought assets that made a lot of sense and one plus one doesn’t always equal three. The gross margins on (Canopy Growth Corp) has been some of the worst in Canada. It’s not surprising investors have been very frustrated.”
But Seymour thinks Klein can fix Canopy’s problems.
“This appointment of truly a consumer products CEO, someone who knows the CPG world very well and someone who knows this company very well, is very exciting, I think he’s the right man for the job.”