CGC stock is leading the cannabis sector lower in early session as Canopy Growth (TSX:WEED) (NYSE:CGC) spooked investors by announcing the sudden exit of Bruce Linton, co-CEO of the company.
Major Setback
Canopy Growth is the world’s largest cannabis company, and whenever the company makes any moves, it is among the most important stories in the industry—and CGC stock is quick to react more often than not. In a sensational new development, the company announced that its co-Chief Executive Officer Bruce Linton was going to step down from his post, effective immediately. This is a hugely significant development since Linton was the founder of Canopy Growth and had managed to develop it into the world’s biggest cannabis company.
It has come to light that Linton did not step down from his position voluntarily. Rather, he was voted out in a classic board room coup. He released a statement after the events of the board meeting in which he said he was in agreement with the board’s decision.
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Canopy Growth did not state the reasons behind its decision to vote out Linton. Now that he is going to step down, the other co-CEO Mark Zekulin is going to take over the role full time. Now, one thing that needs to be understood with regards to publicly listed companies is the fact that investors and markets do not like uncertainty.
It is particularly more acute when the founder of a company is ousted by his board. After the news broke, CGC stock dived by as much as 4% to $38.40 on the New York Stock Exchange, and it remains to be seen how the stock fares over the next few days.
On the Canadian side, WEED stock is down 4% at $50.45.
Linton had led the company to new heights ever since he founded the company in an abandoned factory in 2013, and the very next year, it went public. Under his stewardship, Canopy Growth grew steadily and then exploded after cannabis was legalized in Canada. Canopy Growth is now valued at $14 billion and remains the most valuable company. Constellation Brands (NYSE:STZ), which had invested $4 billion into Canopy Growth, stated through a spokesperson that it is fully behind the decision taken by the board.
Despite today's fall, CGC stock is still up 40% since the beginning of this year.
Do you agree with the board's decision to get rid of Bruce Linton?
Featured image: Canva
