Jefferies analyst sees Canopy Growth getting much less than it paid for retail stores it's selling

Jefferies analyst Owen Bennett said Wednesday that Canopy Growth Corp.'s /zigman2/quotes/200603886/composite CGC -3.79% /zigman2/quotes/202205609/delayed CA:WEED -5.41% plan to divest 28 retail stores stands out as an example of the "wasted capital" by the cannabis company's former management. Canopy Growth said after the closing bell on Tuesday that it's selling its Tweed and Tokyo Smoke stores for an undisclosed price in a move to exit the retail cannabis business. Canopy Growth retail licensee OEGRC will buy 23 stores and the remaining five stores in Alberta will be acquired by Four20 Pharma. Canopy Growth will also close five stores in Alberta. "Given deal terms were not disclosed, we do not imagine the multiple was attractive, especially alongside the fact that retail in Canada overall is struggling, and also given the deal more appears to be driven by getting costs off the P&L," Bennett said Wednesday in a research note. Bennett estimated a sale price of about C$10 million ($7.3 million), based on Canopy retail sales of C$50mn and a multiple of 0.2x. "When considering Canopy paid C$250mn for Tokyo Smoke back in July 2018, and this deal also includes all the Tweed stores, this is another example of the wasted capital that was very common under old leadership," Bennett said. Shares of Canopy Growth fell 2% in premarket trades.