Canopy Growth Corporation’s Strategic Shift Towards Exchangeable Shares

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Written By Elizabeth Monroe

Canopy Growth Corporation (TSX: WEED) (Nasdaq: CGC), a leading entity in the cannabis industry, announced a significant proposal aiming to reshape its corporate structure through an amendment to its articles of incorporation. 

The proposed amendment, endorsed by the independent proxy advisory firm Glass Lewis & Co. (“Glass Lewis”), involves the creation and authorization of an unlimited number of new class non-voting and non-participating exchangeable shares (the “Exchangeable Shares”) in Canopy Growth’s capital. 

Additionally, it seeks to revise the rights associated with the common shares (the “Common Shares”), introducing a conversion feature that allows each Common Share to be converted into one Exchangeable Share at the shareholder’s discretion.

Glass Lewis’s Endorsement

Glass Lewis, a renowned independent proxy advisor serving institutional investors across approximately 100 global markets, has recommended that Canopy Growth shareholders vote in favor of this transformative amendment. 

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This endorsement is pivotal, considering Glass Lewis’s influence, which extends to advising the majority of the world’s largest pension plans, mutual funds, and asset managers, who collectively oversee over $40 trillion in assets. 

Their support underscores the amendment’s alignment with shareholder interests, marking a critical step towards its potential adoption.

The Upcoming Special Meeting

Canopy Growth has scheduled a special meeting of shareholders for April 12, 2024, at 1:00 p.m. Eastern Time, where the Amendment Proposal will be put to vote. 

This meeting represents a key milestone in the company’s strategic evolution, offering shareholders a chance to shape the future direction of Canopy Growth.

Strategic Rationale Behind the Amendment

This strategic move traces back to Canopy Growth’s announcement on October 25, 2022, detailing its ambitions to fast-track its penetration into the U.S. cannabis market. 

The creation of a new U.S.-based holding company, Canopy USA, LLC (“Canopy USA”), is central to this strategy.

Canopy USA is designed to hold all U.S. cannabis investments formerly owned by Canopy Growth, facilitating the acquisition of key entities like Acreage Holdings, Inc., Mountain High Products, LLC, Wana Wellness, LLC, The Cima Group, LLC, and Lemurian, Inc., upon the approval of the Amendment Proposal.

A Strategic Pivot for Growth

The establishment of Canopy USA signifies Canopy Growth’s proactive approach to harnessing the burgeoning U.S. cannabis market’s potential. 

By enabling Canopy USA to acquire significant U.S. THC businesses, Canopy Growth positions itself to deconsolidate the financial results of Canopy USA and recognize it as a non-controlling, equity-method (fair value) investment. 

This strategy not only facilitates immediate value realization prior to the federal legalization of cannabis in the U.S. but also strategically places Canopy Growth for profitable expansion and a strong launch upon the eventual federal permissibility.

Proposed Amendment to Articles 

Canopy Growth Corporation’s proposed amendment to its articles of incorporation, backed by the endorsement of Glass Lewis, represents a pivotal shift in its corporate strategy aimed at capitalizing on the U.S. cannabis market’s dynamic growth. 

Credit: DepositPhotos

By adopting the Amendment Proposal, Canopy Growth embarks on a strategic path that promises to unlock significant value in the short term and positions the company for sustained growth and success in anticipation of federal cannabis legalization in the United States.


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