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Aug 14, 2019

Acreage aims to bring Canopy's Tweed pot stores to California

Cannabis selloff may provide big buying opportunity ahead of key U.S. decision

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Pot buyers in California and Michigan may soon be able to shop at Canopy Growth Corp.’s (WEED.TO) two retailers, Tweed and Tokyo Smoke.

The brands are coming to the U.S. through Acreage Holdings Inc. (ACRGu.CD), which has agreed to be bought by the Canadian cannabis giant. Canopy can’t legally generate any revenue in the U.S., but it’s allowing Acreage to introduce the brands with the goal of establishing a presence ahead of the acquisition. The deal will close only if the U.S. decides cannabis is federally permissible.

“Right now we’re evaluating all options, but states where we don’t currently have dispensaries would be a top candidate: California, Michigan and the like,” Acreage Chief Executive Officer Kevin Murphy said in a phone interview Wednesday.

Acreage plans to open the first Tweed dispensaries in the U.S. this year, and Murphy expects a national roll-out of Canopy’s medical brand Spectrum in 2020. The New York-based company is also making changes to its facilities based on Canopy’s processes, which will delay some openings in Florida.

“If we do it correctly the first time, we don’t have to go back and retrofit,” he said.

Acreage also wants to make acquisitions in states like Colorado and Arizona. The company can issue as many as 63 million shares for deals, with the targets knowing they’ll eventually end up with Canopy stock if the U.S. changes its federal laws. However, “we will not be using our shares to acquire more companies, we will be using other mechanisms because we believe our stock is woefully underpriced,” Murphy said.

Acreage shares have lost more than 40 per cent this year, including an 11 per cent drop on Wednesday after it reported second-quarter revenue that missed analyst expectations.

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.