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Jul 3, 2019

'A blow to the company': Analysts react to Bruce Linton's exit from Canopy

Bruce Linton says leaving Canopy Growth wasn't his choice

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Bruce Linton, one of the Canada’s most high-profile chief executives, is out as co-CEO and chairman of Canopy Growth Corp.

The Smith Falls, Ont.-based company announced Wednesday that 52-year-old Linton is leaving the pot producer, effective immediately. Co-CEO Mark Zekulin will take over as sole boss while Canopy begins searching for a new leader. 

Here’s a look at how analysts are reacting to Linton’s surprising exit.

 

John Chu, analyst with Desjardins Securities

“The surprising loss of co-CEO and chairman of the board Bruce Linton is a blow to the company, in our view, and likely creates near-term uncertainty with respect to the company’s leadership and direction … Mr. Linton was generally viewed as a trailblazer and visionary, and was the face of the company. The company does have a deep management team but we still view Mr. Linton’s departure as a meaningful loss.”

Douglas Miehm, analyst with RBC Dominion Securities

“In our view, Mr. Linton had set relatively high expectations in the market  … with underlying operational execution underperforming an already-struggling peer group. Thus, we believe there may have been a disconnect between the near-term execution sought by Constellation Brands Inc. at this point and Mr. Linton's focus on investing for the longer term, often at the expense of short-term performance.

“Investors should also be aware that new CEOs with a different operating philosophy normally ‘clear the decks’ when they join. As such, the next several quarters could be ‘transitional’ and volatile prior to the release of significantly improved results in fiscal Q4/2020 associated with the launch of value-add products late in 2019.”

Vivien Azer, managing director and senior research analyst, Cowen

“The magnitude of losses for [Canopy] has expanded far more than we had expected, and while we commend Linton for his vision in establishing the world's leading cannabis company, we believe new leadership will be a welcome change … We do not anticipate Zekulin's transition to sole CEO to prove disruptive, as his role had largely centered on the company's day-to-day operations. Overall, we view the move as a positive for both [Canopy] and [Constellation] and maintain Outperform ratings on both companies.”

Ryan Tomkins, research analyst, Jefferies

“We applaud Linton's achievements, but agree a [consumer packaged goods]-focused appointment with large-cap experience would be beneficial … Over the next 18 months we see valuations increasingly driven by financial delivery and those names on inflated multiples that are not able to show improving bottom lines could be at risk of significant de-rating.”

Cannabis Canada is BNN Bloomberg’s in-depth series exploring the stunning formation of the entirely new – and controversial – Canadian recreational marijuana industry. Read more from the special series here and subscribe to our Cannabis Canada newsletter to have the latest marijuana news delivered directly to your inbox every day.

 

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