Cash Deal
Canopy Growth agreed to purchase U.K. skin-care brand This Works for
Too Many Deals
In the last month alone, Canopy Growth has bought This Works, Cannabinoid Compound Company and the rights to purchase Acreage Holdings (ACRGF). In just a month, the large cannabis company has expanded into a European skincare company, a European medical CBD provider along with a multi-state operator in the U.S.
All of the companies are just loosely related to the cannabis industry that is expected to be a global industry with annual revenues in excess of $100 billion. Even a company the size of Canopy Growth can’t be all things to all consumers and patients looking to consume cannabis and CBD-infused products.
On top of just developing CBD-infused products for health and wellness or medicine, Canopy Growth is also working on an industrial hemp park in New York. The company is spending hundreds of millions on growing hemp to produce CBD and the deal suggests a global plan with thousands of acres planted to cultivate and process hemp-derived CBD.
The company promotes vertical integration, but very few industries grow their own commodities used to create beauty and wellness products. In addition, opening retail stores and working on pharma related drugs makes for a wide swath of business where focused companies are likely to have better outcomes in the fast moving cannabis sector.
Takeaway
The key investor takeaway is that owning a brand like This Works seems logical in the rapid market shift into CBD-infused products. A company with broad expertise in the health and wellness sector appears positioned to thrive in this new market opportunity, but the issue is the combination with all of the other recently bought businesses at Canopy Growth. Not to mention, the old shareholders aren’t passionate enough about the business to want a piece of this investment vehicle.
All of the signs continue to point towards a business nearly impossible to manage and compete with units focused primarily on each individual market whether medical cannabis in Canada or hemp cultivation in the U.S. or CBD wellness products in Europe. Investors should follow the This Works shareholders and cash out of the stock
sfg8....Just wondering what technical information you are using to make decisions on KGKG? Over the past year the company has grown its market cap from 7m to 92m. A 7m market cap is barely a company that warrants being publicly owned. History proves that our chances of making money as investors after such a large move will be highly challenging. Even at 92m this is still a very small company which lacks any reportable reliable information as far as fundamentals. No earnings, no dividend (which is expected), relatively little to drive the stock outside of speculative news and the charts.
I get that the company is expanding warehouse manufacturing and storage and that the industry is going to produce winners. I am a fan of the concept and use cbd product personally for arthritis pain. However, the competition in this space is surging with many far more established players already. Also, the industry is already seeing rapidly declining consumer pricing. I have seen 2 ounce tubes of the cbd pain creams fall by 50% or more in price over the past year. Increasing competition is only going to drive prices downward and squeeze profits. This is bad news for any company expanding operations like KGKG.
Your statement about KGKG turning to profitability this year seems to be a longshot given the costs associated with their current expansion plans, rising pricing and the inevitability of continued pricing pressure.
Established in 1995,
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