Canopy Growth Corp. (NYSE: CGC) reported better-than-expected revenue for its fourth quarter of 2019 but warned of a negative impact on net income following its imminent merger with U.S. based cannabis company, Acreage Holdings. Shares responded with a more than 8% dive Friday morning.
The Company said revenue grew 13% compared to last quarter to net USD 71.4 Million. Analysts expected Canopy to report sales of USD 67.7 Million. Canopy disappointed on earnings by a wide margin, however. It posted an adjusted loss of USD 0.74 a share versus an expected loss of USD 0.24.
On Wednesday, Canopy said company shareholders voted “overwhelmingly” in favor of a previously proposed merger with Acreage. “Completion of the Transaction is intended to position us to efficiently and effectively enter the US cannabis market once federally permissible,” said Bruce Linton, Chairman & Co-CEO, Canopy Growth. “Alongside our international market strategies and U.S. Hemp strategy, we believe the acquisition of Acreage will be a key step in bolstering our position as a truly global company.” On Thursday, the Company indicated it expects the transaction “to have a materially negative impact on net income in the first quarter of fiscal 2020.”
In the next fiscal year, Canopy said it aims to rapidly expand into the United States CBD market and unveil its own branded vape technology. Last quarter, Canopy acquired Storz & Bickel, medical device company that specializes in vaporizers.
Shares of Canopy growth have gained nearly 52% this year versus competitors like Aphria Inc. (NYSE: APHA), up 14%, and Aurora Cannabis (NYSE: ACB), up 46%.