Canopy Growth's Big Step Toward Entry Into US Cannabis Market As DEA Rescheduling Looms

Canopy Growth Corporation WEED CGC said on Thursday, April 18 that in connection with the creation of the company's non-voting and non-participating exchangeable shares, Greenstar Canada Investment Limited Partnership and CBG Holdings LLC, each a wholly-owned subsidiary of Constellation Brands Inc STZ exchanged all 17,149,925 common shares in the capital of the company they collectively held for 17,149,925 exchangeable shares for no consideration.

The CBG Group no longer holds any common shares of Canopy, as a result, the company said on Thursday.

Each exchangeable share is convertible, at the option of the holder, into one common share. The exchangeable shares are not traded on a public market and represent an interest in Canopy Growth directly, not Canopy USA, LLC.

Canopy Growth's shareholders approved the creation of a new class of exchangeable shares of the company during their special meeting on Friday, April 12.

Why It Matters

The move enables the acceleration of Canopy Growth's entry into the U.S. THC market, which is forecasted to reach roughly $50 billion in 2026, the company said on Monday in a press release.

David Klein, Canopy Growth's CEO who spoke this week at the Benzinga Cannabis Capital Conference in Florida, praised the move.

“This is another important step forward for the Canopy USA strategy following the recent and overwhelming approval of our shareholders to create this exchangeable class of shares,” Klein said. “We look forward to maintaining an enduring positive relationship with CBI as our largest shareholder, and to the further advancement of the Canopy USA strategy that this change enables as Canopy USA moves forward with the acquisitions of Wana, Jetty and Acreage.”

Additionally, Canopy Growth simultaneously entered into an exchange agreement with Greenstar, under which Greenstar converted roughly CA$81.2 million ($59 million) of the principal amount of the CA$100 million principal amount promissory note issued to Greenstar by Canopy Growth on April 14, 2023, into 9,111,549 exchangeable shares.

As a result of both transactions, CBG and Greenstar now hold an aggregate of 26,261,474 exchangeable shares.

DEA Rescheduling Looms

The move comes ahead of the anticipated reclassification of cannabis from a Schedule I substance to Schedule III following the August recommendation from the Dept. of Health and Human Services to the DEA to ease federal restrictions on cannabis. 

The policy change could pave the way for U.S. exchange listings, signaling a major shift in the industry’s financial and regulatory framework. 

"Buoyed by recent comments from the President and the Vice-President, Canopy Growth continues to be cautiously optimistic that cannabis will be moved to Schedule III in the near term,” Klein said earlier this month. “Following this, we expect an immediate enhancement to the cashflow of Wana, Jetty, and Acreage resulting from the removal of the prohibition on business deductions in Section 280 which we expect to help power their growth."

Now read: DEA Public Comment Period And A Cannabis-Related Crypto Bill? You Heard It First At Benzinga Conference

CGC Price Action

Canopy Growth’s shares traded 3.45% higher at $8.10 per share at the time of this publishing early Thursday afternoon.