Canopy Growth Corp. said it took a non-cash impairment representing the entire value of goodwill from its cannabis operations in the last quarter, in the latest sign of the emergency in which big growers have been mired of the country The Smiths Falls, Ont. The cannabis company said the non-cash goodwill impairment was nearly $1.73 billion, and was recorded due to the decline in the company’s market value during its fiscal first quarter, which end on June 30. That pushed the company into the red for the period as it posted a net loss of $2.09 billion, compared with 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 share price has been decimated. By the close of trading on Thursday, its TSX-listed shares had lost 95% of their value since the peak of the legalization era. By comparison, the S&P/TSX Composite Index is up 27 percent over that period. But Canopy isn’t alone, and it’s not even the laggard. The share price of Aurora Cannabis Inc. it has fallen by 98.9% during this period.
“I think what we’re seeing we’ve seen before in so many other sectors, where you get a lot of hype, then the reality doesn’t live up to the hype initially. There’s a 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 CEO of Caldwell Investment Management.
“So I’m not calling the bottom of cannabis right here, but I think somewhere around here, you’re going to see the consolidation phase and the resurgence of the industry.”
Caldwell said he has not directly invested in the cannabis industry, although he sits on the board of the Canadian Stock Exchange, whose listings include a wide range of cannabis companies. In its fiscal first quarter, Canopy’s net income fell 19 percent year over year to $110 million, slightly below analysts’ average estimate of $112 million. The company said its total cannabis sales for the period fell 29 percent to $66 million. Of that, only $39 million came from recreational pot in Canada, representing a 35% dive from the previous year. It wasn’t all bleak during the quarter, but that was thanks to Canopy’s moves out of the pot industry. It said revenue from its BioSteel sports drinks business rose 169 percent year-on-year to $17.9 million.