EXCLUSIVE - Canopy Growth CFO On ATM Equity Offering: 'We Have One Of The Strongest Balance Sheets In Cannabis'

Canopy Growth Corporation CGC's announcement of an at-the-market (ATM) equity program has generated significant buzz within the cannabis industry, even as the stock traded down following the news. The program, which allows Canopy to issue and sell up to $250 million worth of its common shares, aims to bolster the company’s financial flexibility and support its strategic initiatives.

In an exclusive conversation with Benzinga Cannabis, Judy Hong,s  Canopy Growth's CFO emphasized the company's strong financial position and strategic rationale behind the ATM program. “We’re pleased to announce this offering, which further enhances Canopy’s financial flexibility and balance sheet. Having already reduced our debt by more than $1.1 billion over the past 18 months, and with no material debt maturing until 2026, Canopy has one of the strongest balance sheets among major cannabis companies,” Hong said.

She highlighted Canopy's significant debt reduction over the past year and a half, positioning the company favorably compared to many of its peers in the cannabis sector. The $250 million ATM, equivalent to approximately CAD $340 million, represents a substantial portion of Canopy’s outstanding long-term debt, further solidifying its cash and debt position.

Strategic Use Of Proceeds

Canopy plans to utilize the proceeds from the ATM program to support its existing businesses, fund potential acquisitions and for general corporate purposes. This strategic move aligns with Canopy’s ongoing efforts to strengthen its core operations and pursue growth opportunities.

Hong elaborated on the company’s focus for the upcoming year. “In the year ahead, we remain resolutely focused on growing profitably and driving continued momentum across our core businesses as we position Canopy for long-term industry leadership.”

Advancing U.S. Operations

The announcement comes on the heels of significant developments in Canopy’s U.S. operations. Canopy recently exercised its option to acquire all issued and outstanding Class E subordinate voting shares of Acreage Holdings, Inc. ACRHF. This acquisition is part of a two-stage deal initiated in 2019 and is expected to close in the first half of 2025, subject to various conditions and regulatory approvals.

Canopy Growth's management team explained the strategic importance of these moves in an email to Benzinga. They noted that the news of Canopy USA's progress, coupled with addressing Acreage’s debt challenges, positions Canopy to capture immediate opportunities in Ohio, where Acreage has five strategically located dispensaries and a long-standing positive presence.

Performance Highlights And Market Reaction

Despite these positive developments, Canopy’s stock traded down following the ATM announcement. This reaction reflects a broader market trend where equity offerings often lead to short-term stock price declines.

Nonetheless, in its Q4 FY24 earnings report, Canopy experienced

significant progress, with organic revenue growth of 16% compared to Q4 FY23 as well as improvements in gross margins, adjusted EBITDA and free cash flow. The company reported consolidated net revenue of $73 million in Q4, driven by robust performance across its business units, particularly Storz & Bickel, which saw a 43% revenue increase year-over-year.

Photo: Canopy Growth