Constellation Brands Just Upped Its Stake In Canopy Growth. Here's Why The Pot Stock Is A Buy
Constellation Brands (NYSE: STZ) has given Canopy Growth (NYSE: CGC) a renewed strong vote of confidence. On May 1, the company known for its Corona beers announced that it would be exercising warrants which would give Constellation a 38.6% stake in the cannabis company. That's well up from the 9.9% ownership that Constellation had back in 2017 when it first invested in the Canadian marijuana producer. In 2018, it invested another $4 billion into Canopy Growth.
While a greater stake means that Constellation will have a larger share of Canopy Growth's profits and losses moving forward, it also suggests something else for the cannabis company's investors: greater stability.
Constellation hasn't always been happy with its cannabis investment. After all, Canopy Growth's recorded losses in four straight quarters totaling a combined 2.1 billion Canadian dollars, weighing down Constellation's own results in the process. The cannabis producer's difficulty in getting to breakeven is likely one of the reasons why Canopy Growth's co-CEO Bruce Linton was fired nearly a year ago.
Source Fool.com
