Canadian cannabis producer Canopy Growth on Wednesday announced the departure of Bruce Linton as co-chief executive, a surprise move that analysts say could be tied to the company’s disappointing earnings.
Effective immediately, Linton is stepping down and co-CEO Mark Zekulin will become the sole interim chief executive as the board looks for a permanent leader.
“The Board decided today, and I agreed, my turn is over,” Linton said in a statement.
He later told CNBC: “I was terminated.”
Linton spent over five years building what is now the largest cannabis company in the world.
However, Canopy recently reported a quarterly loss of 98 million Canadian dollars ($70 million), on an adjusted basis, before interest, taxes, depreciation and amortization (EBITDA). The shortfall was much worse than analysts expected.
That prompted the CEO of Constellation Brands – which has a large stake in Canopy – to say during a conference call with analysts last week he was “not pleased” with the Canadian company’s performance.
Rod Elliot, senior vice president for Global Public Affairs and head of the consultancy’s cannabis practice, said Linton’s ouster is part of a company – and industry – coping with rapid growth.
“At this point it’s important to remember that Canada is currently made up of 180 domestic startup/scale-up companies, and we are going to see some growing pains in the industry as these companies try and execute their business plans and begin to generate revenue and actual sales of cannabis to medical and recreational cannabis consumers,” he told Marijuana Business Daily.
Canopy has said it expects to reach CA$1 billion in revenue in 2020, more than five times last quarter’s total of CA$94 million.
But growing pains are evident.
Sales volumes failed to increase after Canada legalized recreational cannabis last October, owing partly to the lack of storefronts in places such as Ontario.
Canopy sold 8,288 kilograms (18,272 pounds) and kilogram equivalents of adult-use cannabis in the third fiscal quarter, but that total fell to 7,963 kilograms and kilogram equivalents the following quarter.
Canopy’s medical cannabis revenue took a hit in the most recent period.
The company earned CA$11.5 million in medical cannabis revenue in Canada in the quarter, down 40% from CA$19.5 million in the same period a year earlier.
In a note to investors, Vivien Azer, managing director and senior research analyst at Cowen, wrote that the move was not surprising given the magnitude of Canopy’s recent losses.
“The company’s biggest shareholder, having vocally expressed their ‘disappointment’ with (Canopy’s) most recently reported earnings, and having already installed an (Constellation Brands) alum as CFO, we are not surprised by this move,” she said.
Canopy trades on the New York Stock Exchange as CGC.
Matt Lamers can be reached at email@example.com