Canadian marijuana producer Canopy Growth has named David Klein its new CEO, after experiencing some upheaval in its upper ranks over the last year. He comes to Canopy from wine and spirits-maker Constellation Brands, where he has served as chief financial officer since 2015. The company has recently struggled through several senior leadership changes, federal regulation, and tax concerns, and shaken investor confidence – it will be up to Klein to steer Canopy towards higher profitability and future growth.
Presently, Canopy Growth is the world’s largest publicly-traded cannabis company, according to market value. Founded by Bruce Linton and Chuck Rifici in 2014, they built their brand into a rock-star business by signing celebrity sponsors like Snoop Dogg and Martha Stuart and securing lucrative investment deals like the one made with Constellation.
Constellation spent $4 billion to buy a 38 percent stake in the cannabis company last year and quickly stepped up to take control in the boardroom. In June, Canopy reported more significant than expected losses in Q4 due to slowing cannabis sales – resulting in a 20-cent slump per share and almost $39 million lost directly from Constellation’s earnings. Canopy’s board of directors expressed their displeasure shortly after that by asking co-CEO Linton to step down – Constellation’s CEO William Newlands stating they were “not pleased” with Canopy’s 4th quarter results.
For his part, Linton was philosophical about parting ways with Canopy: "I really think at the end of the day, sometimes entrepreneurs are entrepreneurs because they are not super-employable," he said in a CNBC phone interview. "And I would say I probably don't have a resume because I like creating businesses and driving them. I think what they’re doing will probably be a better decision.”
Mark Zukelin became the sole chief executive and agreed to stay on until the board found a suitable replacement. He continued to man the helm through a troubled sea of subpar quarterly earnings and broader market challenges until Canopy’s recruited a new CEO from Constellation’s own leadership team. Rising star David Klein wields a Wall Street reputation for being an operating CFO and is a strong candidate for making the best of Canopy's size and global reach to increase earnings.
"Canopy Growth sits at the forefront of one of the most exciting new market opportunities in our lifetime," said Klein. "Thanks to the efforts of Mark and the entire team at Canopy Growth, no company is better positioned to win in the emerging cannabis market. I look forward to working with the team to build on the foundation that has been laid, to develop brands that strongly resonate with consumers, and to capture the market opportunity before us. Together we will drive sustainable, industry-leading growth that benefits employees, shareholders, and the communities in which we operate."
The Ontario-based business enjoyed a 14 percent bump in stock prices after the announcement, but analysts believe it to be a mixed bag for the company.
“Positive views (are) likely to be taken around implications for greater financial focus and commitment from Constellation Brands, though also negatives around potential lack of external appetite for the role, and the likelihood of a heavy focus on an unproven beverage category,” wrote Jefferies’ analyst Owen Bennett in a note to investors. “Expect financials to continue to underwhelm as domestic Canada struggles to continue.”