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'I was terminated': Bruce Linton ousted from Canopy Growth

Canopy Growth Corp. (WEED.TO)(CGC) co-chief executive and chairman Bruce Linton has been abruptly ousted from his role and board seat at the world’s largest cannabis company.

The Smiths Falls, Ont.-based company’s president and co-CEO Mark Zekulin will step in as sole CEO effective immediately, and begin a search for new leadership.

Rade Kovacevic, who currently leads Canadian operations and recreational strategy at the company, will become Canopy Growth’s president. John Bell, a director at the company, has been appointed chairman.

"Creating Canopy Growth began with an abandoned chocolate factory and a vision," said Linton in a news release. "The board decided today, and I agreed, my turn is over.”

Zekulin has been with Canopy Growth since its inception. However, Linton is better known as the face of the company, and in large part the legal cannabis industry.

His departure comes on the heels of blunt comments from the chief executive of Constellation Brands Inc. (STZ), which has a 38 per cent stake in Canopy Growth with the option of acquiring a majority in the future.

Speaking on a conference call with analysts on Friday, Bill Newlands said he was “not pleased with Canopy's recent reported year-end results.” Canopy Growth reported a net loss of $670 million for full-year fiscal 2019, more than 12 times the $54 million booked in the same period a year ago.

Newlands said his company remains happy with its investment in the cannabis space, in which it sees “long-term potential.”

“While Canopy will never be the same without Bruce, the team and I look forward to continuing to do what we have done for the past six years: investing in world-class people, infrastructure and brands, and always seeking to lead through credibility and vision," Zekulin added in the release.

"I personally remain committed to a successful transition over the coming year as we begin a process to identify new leadership that will drive our collective vision forward. I know the company will continue to thrive as the Canopy story continues on for years to come."

New York-listed Canopy Growth shares fell 5.66 per cent to US$37.90 at 8:07 a.m. ET on Wednesday.

Speaking on CNBC’s Squawk Box, Linton said his departure was related to the closing of Constellation Brands’ $5 billion investment in Canopy Growth, which ignited unprecedented investor interest in the sector when it was announced last August.

“A condition of that closing was the board had to be reconfigured. About eight months and two days later, I think the board decided they wanted a different chair and a different co-CEO. I’m out effective immediately,” he said. “I was terminated.”

Newlands and Constellation Brands CFO David Klein serve as members of Canopy’s board of directors.

“We fully support the decision made by Canopy Growth’s Board of Directors to appoint Mark Zekulin as the company’s sole CEO. Mark has played an integral role in the company’s success since its inception, including managing all aspects of the company’s day-to-day operations,” a Constellation Brands spokesperson told Yahoo Finance in a statement.

“He is committed to helping ensure a successful transition, as Canopy begins a process to identify a leader to drive the company’s vision going forward. The future of Canopy Growth remains very bright and we look forward to the company’s continued success for many years to come.”

Cowen analyst Vivien Azer said the depth of Canopy Growth’s recent losses exceeded her expectation. She anticipates new leadership will be a positive for the company.

“We’re not surprised by this move,” she wrote in a note to clients on Wednesday. “While we commend Linton for his vision in establishing the world's leading cannabis company, we believe new leadership will be a welcome change.”

Azer said she does not expect Zekulin’s transition to sole CEO to be disruptive due to his long-time role at the company. She maintains an “outperform” rating on Canopy Growth shares with a target price of $82.

Canopy Growth reported revenue of $94.1 million in the quarter ended March 31, up from $83 million in the fiscal third quarter. The company posted a net loss of $323.4 million, or $0.98 per share, compared with a loss of $61.5 million in the prior period.

The loss was blamed in part on rising operating expenses, mainly from sales and marketing, increased compensation and acquisition-related costs. Analysts expected a net loss of $63.5 million and an adjusted loss of 25 cents a share.

Canopy Growth, Canada’s largest cannabis producer, was founded in 2013. The company has emerged as a global leader in the sector under Linton’s tenure, achieving milestones ahead of peers including a listing on the NYSE and striking a deal with a U.S. cannabis firm ahead of federal legalization in that country.

Linton, known for his laid-back personality, frequently dresses in faded black jeans, a black Canopy Growth t-shirt, and a jacket with a “Hi” lapel pin. He is widely-seen as the cannabis industry’s de facto spokesperson thanks to his candid commentary and leadership role at a company with a market capitalization north of $18 billion.

Linton drew reporters from as far away as China and Denmark to his Tweed-branded retail store in St. John’s, N.L. when he sold the inaugural nationally-legal, non-medical pot purchase in a G7 country on Oct. 17, 2018. He told Yahoo Finance Canada that four backup credit cards were hidden under the counter in case the first customer’s payment was declined.

A constant departure from buttoned-down corporate culture, Linton has joked that he buys his suits from the discount retailer Winners and mocked those who indulge in excesses, such as owning a Lamborghini.

“I’ve seen many people with very fancy cars, none of them work here,” he told Yahoo Finance Canada last December.

Yahoo Finance Canada

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