It didn’t look possible. And yet, here we are. Shares of Canopy Growth (TSX:WEED) have absolutely surged in the last few weeks. There are macro reasons, but those reasons affect the company more than some of its peers. So, let’s get into them and why Canopy Growth stock could be a screaming buy right now on the TSX today, especially for long-term shareholders.
Reclassification
The most recent hurdle that looks good for the company comes from the United States. The Drug Enforcement Administration (DEA) looks as though it will reclassify marijuana as a less dangerous drug. This has sparked investor optimism for eventual U.S. federal legalization, which could be a massive boon for Canadian cannabis companies like Canopy Growth stock.
This reclassification is huge news for the cannabis sector. Removing marijuana from Schedule I (the most dangerous drug classification) would make it easier for researchers to obtain permits to study its potential medical benefits. This could lead to breakthroughs in areas like pain management, epilepsy, and even mental health conditions.
More opportunities
What’s more, federal legalization (which could follow reclassification) would open the massive U.S. market to Canadian cannabis companies like Canopy Growth stock. This could lead to significant revenue growth for the industry. And this would add even more benefits.
Once in a lower schedule, there would be numerous benefits. These include federal taxation and regulation of cannabis, generating tax revenue, and even reducing crime associated with the black market. Furthermore, businesses in the legal cannabis industry have a difficult time banking and attracting investment from federal restrictions. Reclassification could, therefore, ease these limitations.
Canopy Growth’s growth
Then there are the specifics around Canopy Growth stock. Canopy Growth stock is a major player in the Canadian cannabis market, with a large brand presence and established production capabilities. The company has been restructuring to become more profitable, streamlining operations and focusing on high-margin products. Canopy Growth is expanding into new markets like beverages and edibles, which could be significant revenue drivers in the future.
When it comes to the United States, however, Canopy Growth has been making strategic acquisitions in the U.S. market through partnerships like Acreage Holdings, positioning itself for entry if federal legalization occurs. Yet, as mentioned, there are likely to be more benefits for the company even before legalization. Taxes and banking, in particular, could help lead the stock to a profit sooner as opposed to later.
Financing
In the meantime, Canopy Growth stock has been further strengthening its balance sheet. After all, as it’s seen, the company cannot solely depend on a potential new future. Canopy Growth stock, therefore, announced a financing agreement with a single institutional investor, expecting to receive around US$50 million in gross proceeds. The agreement involves exchanging approximately $27.5 million of existing debt for a new senior unsecured convertible debenture maturing in five years.
The investor will acquire a convertible debenture and additional common share purchase warrants, allowing them to acquire common shares at $14.38 for a five-year period. However, the convertible debenture will bear interest at 7.5% and can be converted into common shares automatically should shares hit $21.57.
Bottom line
Canopy Growth stock is growing. The company’s future looks far brighter than it did even just a year ago. While there is still volatility ahead, investors may want to consider opening a stake in the company once more, especially if they plan on holding for years, not just a few months.
