Noah Zivitz

Managing Editor, BNN Bloomberg

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Canopy Growth Corp. said it took a non-cash impairment representing all of the goodwill value of its cannabis operations in the latest quarter, in the latest sign of the rough patch that the country’s large pot producers have been mired in.
 
The Smiths Falls, Ont. cannabis company said the non-cash goodwill impairment was almost $1.73 billion, and was booked due to the drop in the company’s market value during its fiscal first quarter, which ended June 30. That pushed the company into the red for the period, as it reported a net loss of $2.09 billion, compared to a net profit of $392,418 a year earlier.
 
Since peaking in mid-October 2018 amid euphoria surrounding the legalization of recreational cannabis in Canada, Canopy’s stock price has been decimated. Through the close of trading Thursday, its TSX-listed shares had lost 95 per cent of their value since the legalization-era peak. By comparison, the S&P/TSX Composite Index has rallied 27 per over that span.
 
But Canopy isn’t alone, and it’s not even top laggard. Aurora Cannabis Inc.’s stock price has plummeted 98.9 per cent over that period.

“I do think what we're seeing we've seen before in so many other sectors, where you get a tremendous amount of hype, then the reality doesn't live up to the hype initially. There's consolidation, stocks take a hit, and then there's a reorganization, and the sector emerges as something new and better,” said Brendan Caldwell, president and chief executive of Caldwell Investment Management.

“So I'm not calling the bottom for cannabis right here, but I think that somewhere in here, you will see the consolidation phase and the resurgence of the industry.”

Caldwell stated he hasn’t directly invested in the cannabis industry, though he sits on the board of directors at the Canadian Securities Exchange, whose listings include a wide array of cannabis companies.
 
In its fiscal first quarter, Canopy’s net revenue fell 19 per cent year-over-year to $110 million, falling a bit shy of the average analyst estimate of $112 million. The company said its total cannabis sales during the period tumbled 29 per cent to $66 million. Of that, just $39 million was from recreational pot in Canada, representing a 35 per cent dive from a year earlier.
 
It wasn’t all bleak in the quarter — but that was thanks to Canopy’s moves outside the pot industry. It said revenue from its BioSteel sports-drinks business soared 169 per cent year-over-year to $17.9 million.