Canopy Growth (TSX:WEED)(NYSE:CGC) showed Bruce Linton — the firm’s now ex-co-CEO — the door in a move that shocked the entire industry.
Linton was there for the first legal cannabis sale the moment the clock struck midnight on legalization day, and with his frequent appearances in the mainstream financial media, Linton was known by many as the face of the nascent cannabis industry.
While Linton was indeed a down-to-Earth guy that seemed all about transparency in the incredibly hazy marijuana market, I’ve mentioned in prior pieces that Linton was a bit too laid back when it came to providing commentary on Canopy’s financial results. I wouldn’t take it as far as saying Linton was the Elon Musk of the cannabis industry when it came to shrugging off a bad quarter and promising better results looking ahead, but the man was definitely confident, perhaps overconfident when it came to his own interpretation of Canopy’s quarterly results.
When Canopy pulled the curtain on its last sub-par quarter, once again Linton was quick to shrug off concerns and emphasized that short-term underperformance and upped expenses were for the better of the firm over the long term. You have to spend money to make money, after all; isn’t that the case with hyper-growth firms?
“Canopy CEO Bruce Linton’s tone shouldn’t have come as a surprise to investors. Every time Canopy reports a number that’s deep in the red, Linton shrugs it off and provides commentary on his [personal] views of the longer-term picture and why near-term losses aren’t a big deal in the grander scheme of things.” I’d said in a prior piece after Canopy’s last quarterly flop.
Was it Linton’s “long-term focus” and failure to deliver highly profitable results in a post-legalization era that was the reason for his ousting? Or was Linton’s leadership seen as sub-par compared to Canopy’s peers? Perhaps it really was merely a “misalignment” with the Constellation Brands folks, as recent reports suggest.
In any case, it’s clear that most investors haven’t been patient enough to stick around with Canopy this year and would rather seek firms that seek to maximize profitability sooner rather than later. While the Linton ousting was a big shocker, it wasn’t the first CEO “firing” in the crazy world of cannabis, and it probably won’t be the last. It’s tough to keep up the momentum that’s been exhibited in the past, and although Linton’s leadership brought multi-bagger returns for investors through the years, the cannabis market appears to be all about “what have you done for me lately?”
I can’t say I’m a fan of Linton’s departure from Canopy. As Constellation makes its mark on top-level leadership, I can’t say I’m too bullish with regards to upside potential moving forward. Frothy valuations have me on the sidelines, and Linton’s exit, I believe, is a sign of a change for the worse.
Stay hungry. Stay Foolish.
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Fool contributor Joey Frenette has no position in any of the stocks mentioned.