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Klein To Take The Reins At Canopy, As Constellation Exerts Control

December 10, 2019

With the announcement that Constellation CFO David Klein will become CEO of Canopy Growth in January, Constellation is looking to tighten the ship at the cannabis group and protect its $4 billion investment in the company.

Klein, who has been with Constellation for 14 years, will become Canopy’s chief executive effective January 14. As CFO at Constellation, Klein has overseen financial operations, mergers and acquisitions, and technology initiatives. He joined Canopy’s board of directors last year and is currently the chairman. Klein will step down from his other positions and transition fully to Canopy Growth, leaving his position as chairman but retaining his board seat. A new chairperson will be appointed when Klein takes over as CEO.

Canopy co-founder and interim CEO Mark Zekulin will resign his position and his seat on the board, effective December 20. His departure follows that of co-founder and CEO Bruce Linton, who was forced out last summer following multiple quarters of disappointing earnings.

The leadership change marks the latest shift toward Constellation veterans stepping into key roles at the cannabis company following the drinks giant’s $4 billion investment in Canopy in 2018, which gave it a stake of approximately 35%. Under Linton’s leadership, Canopy made extensive acquisitions and production investments that overshadowed revenue and led to Constellation writing down the value of its investment.

“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,” Klein said. “I look forward to working with the team to build on the foundation that has been laid to capture the market opportunity before us. Together we will drive sustainable, industry-leading growth.”

Some analysts see Klein’s appointment as a prelude to Constellation potentially making a play for full control of Canopy looking ahead. In an interview with Bloomberg, Linton suggested that Constellation could acquire the remainder of the company and eventually offload its medical division to sharpen focus on cannabis beverages and other recreational forms.

Either way, with Klein’s appointment it’s clear Constellation intends to exert its influence and steer Canopy toward profitability, which it currently projects will be achieved by fiscal year 2022. In its fiscal first half ended in September, Canopy’s revenues more than tripled to C$167 million ($124m) year-on-year, but its adjusted EBITDA loss also nearly tripled, to C$248 million ($184m).—Danny Sullivan

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