Since Constellation bought in: -They've lost a ton of market share
-Lost hundreds of millions, and over a billion quarterly for 2 years now. You dont even need to wait long to see their next edition (Tuesday)
-They've been closing and selling inefficient assets in part because they overbuilt and in part because their weed was bad. I held a Canopy script for 4 years as I wont invest unless Ive used the product. Their name recogition in Canada is synonymous with terrible hay weed.
-Their return on capital is atrocious and they have no chance of profitability for 2 more years. That would be ok if they were growing by leaps and bounds... they are however shrinking their operational footprint. They were aiming for 40% of the market out of the gate. A few years in, they have closer to 10%
-In several quarters, Canopy margins are far lower than Aphrias european medical distribution business!! This one is my favorite because everyone loves to dump on CC pharma. Canopy's cost per gram is no longer published because its so bad
-A little disappointed they havent accomplished more internationally when they had such an amazing lead in the space. 2 years ago, nobody had the international reach of CGC. They let that slide.
-Acreage is the very worst run MSO in the USA and they way overpaid for it, even after it was renegotiated. It will take all $5b from the next round of warrants to turn that asset worth owning. Acreage is a package of licenses that are getting less valuable by the day.
-Hexo sells more drinks than Canopy Auxly sells more edibles, and Aphria sells more vapes. There's no piece of the space that Canopy dominates except pet care after their latest launch.
-Nobody leads like Canopy... their follow through and ability to monetize their first mover advantage leaves much to be desired.
A great narrative around here is that Canopy is the gorilla and their priority was always the USA. Thats 100% nonsense, and all their investor decks, md & as, presentations and interviews older than last year will confirm that for anyone who wants to look. There was an 18 month period where Canopy was aggressive with Aphria and LHS, when they tried to get APHA delisted for jumping the gun with US entry. Bruces never ending line was, we will not enter the US market until it is federally perrnissible. It was only after that lockup agreement thar the narrative changed.
They full on lost the race to be the dominant player in the first nationally legal market on earth. They couldnt scale, grow and sell efficiently in a market 1/10th the size of the USA, and theyve alreagy given away the farm to STZ... so with all that in mind, outside hype, I sincerely dont see any upside for Canopy as they've not demonstrated the ability to deploy capital efficiently. I dont care if they have $10B more in capital to allocate when TRUL, GTII and APHA can manage the same with a fraction of that.
To those deeply invested in CGC, I sincerely hope you make mad gainz, and I think many will this year. They are a hype machine and their assets and brands are powerful and widely recognized. Their positioning is great, their contacts and connections are great, they are diversified and have a command of marketing that is unequal, they have amazing reach, and deep pockets, resources, commitments, and distribution capabilities from STZ, but in the end, the fact is - operationally, they are a damn mess thats still being cleaned up.
I dont want to own them at this point because when I look around, I just see far more opportunity. I want a company on the rise, not a fixer upper. In 2 years time, if Klein keeps doing what he's doing, I may reload with some of the cash they earned me a couple years ago.
Long read, sorry. Hope it helps the bear case at least. Not looking to full on debate with anyone or be trashed for taking time to post my own thoughts so anyone who wants to make a strong bull case, I would sincerely love to read it. Just dont attack me for having my own views please.
GLTA!!