Cannabis LP Canopy Growth DOWN 34% Since End Of February – Why?

Introduction

Canopy Growth (CGC) has gone DOWN 34.3% in the last 5 weeks (i.e. since February 28th) compared to its peers which are “only” DOWN 19.9% and DOWN 66.4% vs. DOWN 16.8% for its peers. Those are dramatic declines for Canopy and here are the reasons why.

1. Canopy Growth faces significant regulatory challenges, particularly in the U.S. market. The company has structured its U.S. operations through Canopy USA, holding stakes in major cannabis brands like Wana Brands, Jetty Extracts, and Acreage Holdings. However, its success in the U.S. heavily depends on federal cannabis reform, which remains uncertain.
2. The company has been operating at a loss, with significant cash burn and negative EBITDA. Despite efforts to cut costs and improve margins, profitability remains elusive.
3. Recent plans to sell up to $200 million worth of stock have raised concerns among investors, contributing to a decline in stock value.
4. Additionally, Canopy Growth’s strategy to consolidate Canopy USA’s financials with its parent company has raised concerns with both the Nasdaq and the SEC. This has led to scrutiny over its accounting practices and compliance with stock exchange regulations. These regulatory hurdles have created uncertainty for investors and impacted the company’s ability to scale efficiently in key U.S. markets.

Here are the performance details for its peers:

1. Cronos Group (CRON): DOWN 16.6% as of w/e April 4th; DOWN 15.3% YTD
2. Tilray Brands (TLRY): DOWN 20.3% as of April 4th; DOWN 55.6% YTD
3. Aurora Cannabis (ACB): DOWN 21.2% as of w/e April 4th; DOWN 5.5% YTD

Interestingly, given Cannabis Growth’s intent to eventually be a major player in the U.S. its stock performance is more, or less, in line with the largest American MSO cannabis stocks, such as:

1. Trulieve Cannabis (TCNNF}: DOWN 24.0% as of w/e April 4th; DOWN 30.8% YTD
2. Green Thumb (GTBIF): DOWN 27.8% as of w/e April 4th; DOWN 34.6% YTD
3. TerrAscend Corp. (TSNDF): DOWN 32.0% as of w/e April 4th; DOWN 43/3% YTD
4. Cresco Holdings (CRLBF): DOWN 33.0% as of w/e April 4th; DOWN 28.0% YTD
5. Verano Holding (VRNOF): DOWN 37.2% as of April 4th; DOWN 54.2% YTD
6. Curaleaf Holdings (CURLF): DOWN 41.2% as of April 4th; DOWN 46.9% YTD