CGC Stock: Canopy Growth Just Solidified Its Place as a Top Pot Stock With Acreage Deal

Canopy Growth Corp Acreage Deal Confirms CGC Stock's High Status
iStock.com/Natee Meepian

CGC Stock Enters U.S.

It’s no secret that I’ve been a strong supporter of Canopy Growth Corp (NYSE:CGC), and so far, Canopy Growth stock hasn’t disappointed. It has gained the support of a number of Wall Street banks, analysts, and investors as it continues to dominate the legal cannabis market.

Now with its latest acquisition, Acreage Holdings Inc (OTCMKTS:ACRGF, CNSX:ACRG.U), Canopy Growth is looking to enter the U.S. market. In fact, the Canopy-Acreage deal could be the first step toward Canopy’s global dominance of the legal pot trade.

CGC stock climbed four percent following the announcement of the acquisition, which will see Canopy Growth gain the right to totally acquire Acreage for CA$3.4 billion. There’s an important caveat, however: Canopy has a requirement to exercise that right when cannabis production and sale becomes federally legal in the United States. (Source: “Canopy Growth Announces Plan To Acquire Leading U.S. Multi-State Cannabis Operator, Acreage Holdings,” Canopy Growth Corp, April 18, 2019.)

Following the approval of shareholders from both companies and the Supreme Court of British Columbia, Canopy Growth will pay CA$300.0 million immediately.

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“Our right to acquire Acreage secures our entrance strategy into the United States as soon as a federally-permissible pathway exists,” said Bruce Linton, chairperson and co-CEO of Canopy Growth. (Source: Ibid.)

The acquisition will also require an amendment to the Constellation Brands, Inc. (NYSE:STZ) deal that Canopy Growth struck in 2018.

The overall impact of the deal sees Canopy become one of the first major pot stocks to enter the U.S. market in a significant way.

While the deal is conditional on U.S. federal law reforms, it is the first step toward entering the American marijuana market in a significant way, putting CGC stock far ahead of its competitors in that regard.

Acreage Holdings has licenses to operate—or agreements in place with other license holders—in 20 states. (Source: “$3.4 billion deal to buy Acreage gives Canopy Growth gateway to massive American cannabis market,” Financial Post, April 18, 2019.)

It’s worth noting that Acreage Holdings has former Canadian Prime Minister Brian Mulroney and former U.S. Speaker of the  House John Boehner on its board of directors, giving it unparalleled political access.

Those are two of the highest elected positions in the Canadian and American governments. Those connections could potentially pay huge dividends as marijuana laws are crafted and refined in both countries.

The acquisition, then, puts both political might and a U.S. business presence in the hands of Canopy Growth Corp, a potent combination that will likely pay off in a big way.

In fact, this deal, while strong for Canopy Growth stock in the near term, is really about the future. It’s about accessing the expanding global marijuana market.

The Canopy-Acreage deal is the biggest move yet made by Canopy Growth this year. It puts the company firmly on track to dominate the American legal cannabis market when that market eventually opens.

I’ve long said that CGC stock will likely see gains for years to come and that it is uniquely suited to dominate the industry due to its combination of foundational strength, supply deals, production capacity, strong leadership, savvy business moves, and a reputation as the top dog in pot.

All this is only being strengthened by the Canopy-Acreage deal.

Analyst Take

The largest gains among pot stocks in the coming years will go to the companies that are able to best enter the U.S. market.

With that in mind, Canopy Growth Corp has made a huge leap forward with the Canopy-Acreage deal.

This acquisition reaffirms my confidence in the company and leads me to once again say that CGC stock’s gains will likely continue for years to come.