Canopy Growth Cuts Drake, Keeps Martha Stewart
Canopy said in its filing that More Life Growth didn't meet the "definition of an operation."
Canopy Growth (NASDAQ: CGC) has been following a pretty strident strategy of restructuring the company as it keeps cutting assets and unwinding deals made by former CEO Bruce Linton.
The latest casualty this week was a deal with Aubrey “Drake” Graham to launch More Life Growth company. Drake originally made the deal in November 2019 with Linton. Under the agreement, Canopy sold 100% of its shares in a subsidiary to More Life in exchange for just 40% of the company. Drake held the remaining 60%.
Divesting in Drake
Canopy said in its filing that the subsidiary didn’t meet the “definition of an operation” and thus no goodwill was allocated. Canopy unrecognized assets and liabilities associated with More Life to the tune of C$33.7 million and took a C$10.3 million ($8.6 million) impairment charge on the joint venture in the fiscal fourth quarter.
In the filing, Canopy said it controlled the facility and inventory grown at the facility planned for More Life and had recorded those items as assets for Canopy Growth since the deal had been agreed in 2019.
“We have indeed divested from More Life,” Jennifer White, director of communications at Canopy Growth, has told BNN Bloomberg. “The facility in Scarborough which had been intended to be part of that agreement is now Canopy Growth’s R&D facility, where we will work on plant science and science development projects,” she added.
At the time of the agreement, it was seen as a way to skirt cannabis advertising rules. Drake would be able to talk about More Life as an owner and thus it wouldn’t be considered promotional. At the time of the announcement of the Drake deal, Canopy Growth stock had been on a freefall, dropping from roughly $50 in April 2019 to $18 in November 2019. The news of the Drake deal lifted the stock back into the low $20’s.
Drake may be gone, but the relationship with product celebrity Marth Stewart remains strong. That arrangement was made in February 2019 for Stewart to lend her name to a line of animal CBD products. The products were launched in 2020 and the company expanded the line in 2021. It is rumored that Martha’s pet treats are bringing in a million dollars a month in sales, although this can’t be confirmed as Canopy doesn’t release these sales figures. In May 2021, Stewart was named a Strategic Advisor to Canopy Growth further cementing her position in the company.