Canopy Growth CEO Bruce Linton ousted as board decides 'his turn is over'

Bloomberg

3 Jul, 2019 08:08 PM3 mins to read

Bruce Linton founded the company in an abandoned chocolate factory. Photo / Getty Images

Bruce Linton, who founded Canopy Growth in an abandoned chocolate factory and turned it into the world's biggest cannabis firm, has been ousted as chief executive officer effective immediately.

"The board decided today, and I agreed, my turn is over," Linton, 52, said in a statement on Wednesday. Linton told CNBC he was fired. The company didn't give a reason for his ouster, adding that co-CEO Mark Zekulin will take over as the sole boss as Canopy begins a search for a new leader.

"At the end of the day, sometimes entrepreneurs are entrepreneurs because they're not super employable," Linton said in an interview on the TV network. Canopy shares plunged in premarket trading.

Linton's unexpected departure comes at a key time for Canopy as Canadian marijuana companies come under increasing pressure to prove they can operate profitably in the nascent legal weed industry.

Canopy, based in a former Hershey facility in Smiths Falls, Ontario, has seen its market value surge to nearly $14 billion since Canada legalized marijuana last year. Under Linton's leadership, the stock has gained about 1,900% since it went public in 2014. The company got a high-profile investment from Constellation Brands Inc., the maker of Modelo beer, and has a deal in place to buy Acreage Holdings, a U.S. pot company. Constellation holds four of Canopy's seven board seats.

"We fully support the decision made by Canopy Growth's board of directors to appoint Mark Zekulin as the company's sole CEO," a Constellation spokeswoman said in an email. "Mark has played an integral role in the company's success since its inception, including managing all aspects of the company's day-to-day operations."

Constellation agreed to put $4 billion into Canopy, a bold bet on cannabis that set off a flurry of financial activity as U.S. investors poured money into Canadian marijuana companies. Canopy, founded in 2013, has managed to boost revenue, but continues to post losses and declining gross margins. That has started to weigh on the results of Constellation, which controls nearly 40 per cent of the company. Bill Newlands, the CEO of the beverage maker, recently said he was "not pleased with Canopy's recent reported year-end results."

Linton's departure signals that Canadian companies are under more pressure to execute, and that there may have been a clash with the corporate culture at Constellation, said Bloomberg Intelligence senior analyst Kenneth Shea.

"Constellation has really stuck its neck out to justify the big price it paid," he said.

Canopy's acting Chief Financial Officer Mike Lee joined the company in May from the beer giant.

"Although virtually no details were provided with respect to the timing and rationale behind Bruce's decision to leave at this time, we believe this will cause an influx of speculation in the market and likely weigh significantly on the stock," Matt Bottomley, an analyst at Canaccord Genuity, wrote in a note. "We are surprised by this headline, but are also aware of Constellation Brands' displeasure in Canopy's recent FQ4 earnings, which represented a rather large miss on profitability."

Canopy shares slid 3.7% in early trading, while Constellation fell 1.8%. Linton will also step down as chairman of Canopy Rivers Inc., the venture capital arm of the pot company.