The largest cannabis company by market cap, Canopy Growth Corp (TSX:WEED) (NYSE:CGC), caused a stir yesterday when it announced the termination of Chief Executive Bruce Linton. The news stunned the cannabis market, and CGC stock tumbled initially.
Shares have resurged since, however, climbing almost 2.5%. Currently, they trade for $41.06 USD on the NYSE.
But will CGC stock fluctuate again? Because now, Linton's counterpart, Mark Zekulin, is also going to step down.
CGC Stock Reacts: Zekulin is Next
In an interview with Bloomberg News, Canopy's second CEO said that he will be leaving Canopy Growth once a suitable replacement CEO was found.
The announcement came as Zekulin was in the midst of responding to Linton's termination. The news was then later confirmed in a statement to MarketWatch made later on Wednesday:
"Canopy Growth confirmed that Zekulin would only serve until a new CEO was found."
The Termination Affects CGC Stock
Linton's termination may have been eight months on the cards. The CEO knew it was a real potential when Constellation Brands (NYSE:STZ) first came on board with its industry-shaking $4 billion investment. Under the terms of that deal, Constellation Brands was allocated four of Canopy's seven board seats.
With the majority share of board members held by Constellation, the pair of CEOs considered that they may be ousted from the very company they had founded. Despite this, the $4 billion investment was too valuable to ignore.
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Linton discussed as such in an interview with MarketWatch:
“It went from a board of all independents to a board which is really four Constellation folks, and three that are not. The new governance group created some interesting dynamics … but nobody else [other than Constellation] was writing the first check and then moved boldly with the second check, and that’s what moved them into the driver’s seat.”
What Now?
It is interesting to note that CGC stock is climbing in response to the CEO's departures. While the termination is "hurtful" for Linton and Zekulin, it may be a sign that the company itself is in an enviable position.
Daniel Sax, Chief Executive of real-estate investment company, Sensi Properties, put forward the following idea:
“In entrepreneurship and venture, the role of the entrepreneur is often seen as starting and scaling the business to a point where a transition to a manager more suited to growing and managing a mature business happens.”
It's a hard reality to face for Linton and Zekulin, but perhaps Canopy is now a mature business in need of an executive with a track record of running mature companies.
Sax continues:
"It is not an indictment of [Linton's] leadership, but rather a harsh reality of entrepreneurship and bringing in a large investor such as [Constellation] with an institutional mind-set.”
Canopy Growth was founded in 2013 and now commands a market cap of almost $14 billion. What are your thoughts on this? Are you a CGC stock investor?
Featured Image: Canva
