However, it was the additional $5B investment by Constellation Brands in to Canopy Growth (Click Here) that has everyone talking beverages as well as valuations and M&A. This deal serves many purposes instantaneously:
The short sellers and others who have been stating this is dot.com v.2018 using valuations as their marker have been somewhat discredited. Constellation Brands clearly did their due diligence and a $5B investment in the world’s second largest legal cannabis producer suggests valuations are not so out of whack for at least some companies. Since day 1 we have reminded you the entire cannabis economy exists already and this is the transition of an illegal enterprise into a legal regulated framework that has its roots in 2001 with the first commercial medical grow license issued to CanniMed (now part of Aurora Cannabis). There will always be over valued companies in a new industry (or any industry) and in any new industries the Consolidation Curve applies.
The Canadian Marijuana Index is down approximately 32% YTD (to August 17) whereas the share price of Canopy Growth has increased from $32.37 on January 2nd to $44.18 at the close on August 17th – that is almost a 37% increase. That is pretty staggering when you consider the 32% index decline includes the 37% increase in Canopy. What of course the hucksters fail to mention is that the Canadian index is up well over 100% for the one year period August 18, 2017 to August 17, 2018.