Bruce Linton on Yahoo Finance The hits keep coming back from Canopy Growth Corp. (Canopy Growth Corp share price, Chart TSX: WEED), Canada’s cannabis kings who reportedly more than tripled their investments in the U.S. hemp market.
However, with the pot sector looking back at a high-flying month in January, Canopy co-founder and CEO Bruce Linton suggests that investors should rightly be wary of a bubble.
In early January, Canopy Growth announced its participation in the fledgling US hemp industry with a $ 150 million investment in manufacturing facilities in New York state, a position that has now been increased to $ 500 million for hemp operations in the US.
Canopy celebrates a successful January with the company’s stock price up 76 percent. This was part of an industry-wide boom that saw many cannabis stocks posting double-digit gains.
The top stocks, which have been declining since mid-October, last received a friendly boost from Canopy in August last year when Canopy announced that alcohol giant Constellation Brands increased its investment in Canopy to $ 5 billion and increased its stake to 38 percent. That news sparked a pot run that continued to push inventory levels across Canada until the recreational marijuana opens on October 17.
But just because the rec-pot industry is up now doesn’t mean there’s a lot more clarity about who the winners and losers in the room will be, says Linton, who warns there will be many more losses.
“I think it’s absolutely right that cannabis got frothy, and I’m not necessarily saying that about ours specifically [stock], ”Speaking to Yahoo Finance on Thursday. “But you could list 85 or 90 names that are probably publicly listed and that I have one of the first and most dominant as the operator [companies] have never heard of these companies. “
“I think you will find that the bubbles break with the small ones first because there is really no likelihood that they will have a billion dollar turnover or a major scientific breakthrough, or you will have a 30 percent market share,” he says.
Linton is surprised that Constellation Brands’ share price no longer benefited from investing in Canopy, and argues that Constellation is opening up a potentially huge market for adult cannabis beverages.
“I don’t see why everyone doesn’t buy Constellation stock,” he says. “Your stocks have been trading since you invested the money [to Canopy] to where they almost made it free. “
“I’ve been trying to make sure what we’re doing in Canopy has global exposure. Realized that the ban got you to be the first to figure out how to scale, track ingredient value and get medical results, and fantastic recreational products, there’s an annual market of about $ 500 billion, ”Linton says . “And if you’re the first, does that mean you get one percent or 20 percent? Just because of the logic of the opportunity and the progress we are making, it means this should be a gigantic company. “
Canopy Growth will release its financial data for the third quarter of 2019 after the market closes on February 14. In the three months ended December 31, 2018, investors will get a first look at Canopy’s legalized adult marijuana business in Canada.