Canadian pot producer Canopy Growth Corp. saw its stock pop 14.2 percent after it named a top executive of wine-and-beer company Constellation Brands as its new CEO.
Canopy on Monday tapped David Klein, Constellation’s CFO, as its new chief, which Wall Street quickly read as a sign of a potential merger.
Cantor Fitzgerald analyst Pablo Zuanic wrote a research note predicting a two-thirds probability Constellation — known for its Corona beers and Robert Mondavi wines — would soon bid for the part of Canopy it doesn’t already own.
The Victor, NY, based Constellation already owns 38 percent of Canopy’s stock.
BofA Securities analyst Christopher M. Carey called the succession announcement “a clear win for Canopy” and “an important step in moving its leadership from visionaries … to operators.”
Klein, a 14-year veteran of Constellation, has also served as Canopy’s chairman since October. His replaced Mark Zekulin on Jan. 14, a changing of the guard that will reunite him with Canopy CFO Mike Lee, who previously served as CFO of Constellation’s Wine & Spirits unit.
Klein and Lee together, Carey wrote, are capable of “bringing a level of professionalism in strategy and ability to institute financial discipline that few, if any, in the sector can match.”
After acquiring 10 percent of Canopy in October 2017, Constellation invested an additional $4 billion in August 2018, upping its Canopy ownership to 38 percent.
But after topping $52 a share in April, the stock fell below $14 as Ontario-based Canopy and its Canadian competitors confronted surprisingly slack demand during pot’s first legal year in the country.
Monday’s boost brought the stock back to $21.29 per share, adding to what Carey called a “things get better story at Canopy.”
“We expect Klein to hit the ground running, avoiding the typical CEO transition period,” the analyst said.