Canopy Growth (CGC) co-founder Bruce Linton may have been fired from his CEO role, but he’s still loving the company.
Pointing to Canopy’s disappointing first-quarter earnings report that sent shares falling 15% last week, the ousted CEO hinted that for the company that let him go and recently fell to a near 52-week low, the worst might be behind it.
“A 52-week low is a good thing, right, if you’re trying to buy,” he told Yahoo Finance’s YFi PM as he revealed buying even more shares. “It’s bad to sell.”
The quarter, which revealed a rare drop in sequential recreational marijuana revenue as well as a near $1 billion non-cash charge related to expiring share warrants, looked more like an attempt to get all the negative news out ahead of a replacement CEO coming in, according to Linton.
“If they spent their money on balloons and party favors and there was no durable value that’d be a problem,” he said. “But instead, they created a whole bunch of intellectual property, filed a ton of patents, saw more shipments going international than ever before, which shows me that they are actually looking long-term and implementing what I think is the right plan which is to continue to create durable, differentiated products because they are actually novel and protected.”
Admitting he’s now on the outside looking in, Linton stopped short of definitively confirming that’s what the company was trying to do ahead of naming a replacement CEO that is said to be appointed in the coming months.
“I don’t know if they did that, but I think it would be prudent to do that,” the former CEO said. “Flush as much as you can, and then when you go forward, margins go up because you’ve washed out any non-cash kind of events.”
Gross margins for the latest quarter plummeted to just about 15%, compared to 43% over the same period last year. The company noted on the earnings call part of that was due to including costs associated with facilities that have yet to start producing.
Selling CBD products
For his part, Linton advocated for Canopy to bring in a tech-minded female to take his old role, with the hope being that she could keep the company focused on scaling to win the global cannabis opportunity.
One of the last opportunities Linton himself was focused on before parting ways with the company he co-founded was the opportunity to develop and sell CBD products in the U.S. It was also part of the reason why Linton steered the company to spend nearly $55 million on acquiring skincare company This Works, with the hope that infusing creams with CBD could be a big revenue driver for Canopy. As CEO, Linton made the bold call that Canopy’s push into CBD would culminate in becoming the U.S. CBD market share leader by the end of the year. He still sees that as feasible.
“I know the people running the Canopy CBD stuff for the U.S. — unbelievable team,” he said. “I think if any company can actually crush it on this topic... it’ll be these guys.”