Canopy Growth has appointed Constellation Brands veteran David Klein as its new CEO after months of questions about the company’s fate.
On Monday (December 9), the Canadian cannabis producer told investors the leadership change will go into effect on January 14, 2020, making Klein head of Canopy after a 14 year stint with the alcohol maker and largest shareholder of Canopy Growth.
The announcement follows months of questions surrounding the fate of the company after now ex-CEO and Co-founder Bruce Linton was fired in July following disappointing quarterly results.
Shares of Canopy Growth experienced a boost early in the trading session on Monday, rising over 12 percent from market close on Friday (December 6).
At Constellation, Klein serves as the executive vice president and CFO, overseeing financial operations, mergers and acquisitions and the company’s IT functions. He also sits on Constellation’s executive management committee and currently holds the role of the chair of Canopy Growth’s board of directors.
Klein comes with an extensive background in consumer packaged goods, according to Canopy, as well as experience in markets across North America and Europe.
“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,” Klein said.
Last year, the alcohol maker pumped C$5 billion into Canopy as an investment. At the time of his firing, Linton said a conditional board reconfigurement was set as a part of the deal. This left Canopy’s board with a majority of members from Constellation.
“I think the board had decided they wanted a different chair and a different co-CEO,” Linton said during an interview with CNBC’s Squawk Box following his dismissal over the summer. “So I’m out effective immediately and there’s a search to replace the transitioning co-CEO.”
Klein will take over for Mark Zekulin, the interim CEO who was put in place after Linton’s departure. Zekulin will step down not only from his role as head of the company, but from his seat on the firm’s board of directors as well, effective December 20.
“It has been an incredible six years at Canopy Growth, and I have witnessed the team and company grow from five people in an abandoned chocolate factory, to thousands of people across five continents,” said Zekulin in a statement.
In its 2019 fiscal year summary report, Constellation said its investment in Canopy will help the cannabis producer expand its reach across the sector.
“Backed by our investment, business discipline, and brand building expertise, we believe this relationship will be a game changer for our company as consumer attitudes about cannabis continue to evolve,” Constellation notes in the document.
The investment hasn’t paid off just yet, however. In its results for the second fiscal quarter of 2020, Constellation reported that its share of Canopy’s equity losses totaled US$484.4 million for the period.
For its part, Canopy generated C$76.6 million in net revenue during Q2 2020, a 15 percent decrease from the C$90.5 million it brought in during the year’s first fiscal quarter. The company blamed the discouraging results on a too-small retail sector in key provinces in Canada, including Ontario, and on overestimating the size of the market for its soft gels.
Don’t forget to follow us @INN_Cannabis for real-time news updates!
Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.