Form 4: Constellation Brands Restructures Canopy Growth Investment Through Share Exchange

Constellation Brands and related entities exchanged Canopy Growth common shares for exchangeable shares and a portion of a promissory note, altering their ownership structure.

Summary

• On April 18, 2024, Greenstar Canada Investment Limited Partnership (GCILP) and CBG Holdings LLC (CBG) exchanged their Canopy Growth Corporation common shares for exchangeable shares on a one-for-one basis.
• In December 2023, Canopy Growth effected a one-for-ten reverse stock split, reducing the common shares held by GCILP and CBG by 60,299,333 and 94,050,000 shares, respectively.
• GCILP also entered into an Exchange Agreement to exchange a portion of Canopy Growth's C$100 million promissory note for 9,111,549 exchangeable shares, priced at C$8.91 per share.
• The exchangeable shares are convertible into common shares on a one-for-one basis at the holder's election and are perpetual with no expiration date.
• Constellation Brands, Inc. is the only Reporting Person that has a pecuniary interest in these shares.

Sentiment

Score: 6

Explanation: The document describes a restructuring of investment, which is neutral. The reverse stock split in December 2023 could be seen as slightly negative, but the exchange for exchangeable shares provides future flexibility.

Positives

• The restructuring simplifies the ownership structure for Constellation Brands.
• The exchangeable shares provide flexibility for future conversion into common shares.

Future Outlook

The exchangeable shares are convertible into common shares on a one-for-one basis at any time at the election of the holder and are perpetual with no expiration date, providing Constellation Brands with ongoing flexibility in its investment in Canopy Growth.

Industry Context

This transaction reflects ongoing adjustments in the cannabis industry as companies like Canopy Growth navigate evolving market conditions and strategic partnerships with larger beverage companies like Constellation Brands.

Comparison to Industry Standards

• Constellation Brands' investment in Canopy Growth is a notable example of a large beverage company entering the cannabis market, similar to other partnerships seen in the industry, such as Molson Coors' partnership with HEXO Corp.
• The exchange of common shares for exchangeable shares is a financial maneuver that provides flexibility, similar to strategies employed by other companies restructuring their investments in the cannabis sector.

Stakeholder Impact

• Shareholders of Canopy Growth may see this as a continued commitment from Constellation Brands.
• The restructuring could impact the trading volume and price of Canopy Growth's common shares.

Key Dates