Canopy Growth Corp.
Canadian cannabis company Canopy Growth Corp. stunned the market Wednesday with news that co-Chief Executive Bruce Linton is stepping down from his role and will leave the board, and counterpart Mark Zekulin is next.
Linton admitted Wednesday that he was terminated by the board, while Zekulin later told Bloomberg News that he would leave Canopy Growth /zigman2/quotes/200603886/composite CGC +4.88% /zigman2/quotes/202205609/delayed CA:WEED +5.20% , the world’s largest cannabis company, once it had located a suitable replacement for the top job. Canopy Growth confirmed that Zekulin would only serve until a new CEO was found, in a statement to MarketWatch.
The departure of the two long-serving executives came eight months and two days after Corona beer distributor Constellation Brands Inc. /zigman2/quotes/207737284/composite STZ +0.78% took over four of Canopy’s seven board seats, one of which was occupied by Linton himself. In an interview with MarketWatch early Wednesday, Linton acknowledged that he and Zekulin had discussed the very risk of being ousted from the company they founded but determined that the $4 billion Constellation brought to the table was too valuable to pass up.
“It went from a board of all independents to a board which is really four Constellation folks, and three that are not,” Linton said. “The new governance group created some interesting dynamics … but nobody else [other than Constellation] was writing the first check and then moved boldly with the second check, and that’s what moved them into the driver’s seat.”
Without the two co-CEOs, it’s an open question what the company’s future will hold and how much it will depart from the vision outlined by the two men — such as handing out stock options to every employee of the company, likely selling some of the first grams of legal pot in Newfoundland and basing its operations in the small town of Smiths Falls, Ontario. Smiths Falls has gone through something of a renaissance since Canopy Growth has expanded operations there, employing hundreds of people in a town that had fallen on hard times after a chocolate maker pulled out.
Linton says Canopy Growth is in such an enviable position that its main challenge in replacing him will be sorting through the massive number of candidates he expects will apply for the role.
“There’s no one who is competent on the planet that isn’t going to apply for the job,” he said.
Constellation’s takeover of the board is what led to Linton’s firing, he said. The ouster left him hurt and disappointed, but he said it was not the first time he has been asked to leave a company he helped build.
“It’s hurtful to be ejected from the thing you created,” Linton told MarketWatch over the phone Wednesday, acknowledging that his departure is not voluntary. “The part that’s disappointing to me is to be out of the company, but this is not the first time I’ve been fired as a founder. It’s an evolution I didn’t welcome.”
Investors and others involved in the cannabis sector told MarketWatch that while Linton served an important role, Constellation likely believed that it was time to bring in executives with a longer record of running mature companies.
“In entrepreneurship and venture, the role of the entrepreneur is often seen as starting and scaling the business to a point where a transition to a manager more suited to growing and managing a mature business happens,” Daniel Sax, chief executive of Sensi Properties, a real-estate investment company focused on pot, said in an emailed message.
“It’s clear here that Constellation saw that they could no longer wait for that transition to take place, especially given the recent heat over earnings they were getting. It is not an indictment of Bruce’s leadership, but rather a harsh reality of entrepreneurship and bringing in a large investor such as [Constellation] with an institutional mind-set.”
Linton has been a very public face for Canopy — and for legal cannabis — and has given multiple interviews to publications across the globe telling the company’s story. Canopy was founded in 2013 and commands a market cap of almost $14 billion.
“I think most people don’t know how much I’ve actively been the rational voice globally,” Linton said.
Linton told MarketWatch that he now plans to focus on two software businesses that he’s involved with, Martello Technologies Group Inc. /zigman2/quotes/207302911/delayed DRKOF -2.44% /zigman2/quotes/201199132/delayed CA:MTLO -3.03% , which is publicly traded, and Ruckify Inc., a startup.
Investors viewed the departure as a difficult decision.
“Bruce has been a pioneer in the industry and it will be tough to see him go,” Korey Bauer, portfolio manager of the Cannabis Growth mutual fund launched by Foothill Capital Management, said Wednesday.
Matt Hawkins, managing partner with cannabis-focused private-equity firm Cresco Capital Partners, agreed.
Linton “was instrumental in developing the innovative, forward-thinking deal he crafted with Acreage, one of Cresco Capital’s early portfolio companies,” Hawkins said. “We applaud Bruce for leading Canopy to become the largest publicly traded cannabis company by market value, and look forward to both his and Canopy’s future and the positive impact the company will continue to have on the sector.”