CGC - Canopy Growth hits 52-week low on debt exchange

• Canadian Cannabis producer Canopy Growth ( NASDAQ: CGC ) reached a new 52-week low on Thursday after the company announced agreements to exchange nearly $198M of convertible notes for cash and stock.
• Per the terms of private-negotiated transactions, a group of noteholders ,including a subsidiary of Constellation Brands ( STZ ) ( STZ.B ), will sell their notes in exchange for Canopy ( CGC ) shares and ~$2.4M of cash.
• The announcement weighed on the company shares as its stock recorded the biggest intraday drop since February 2021.
• CIBC equity research analyst John Zamparo lowered his target on Canopy ( CGC ) C$3 from C$5 following the deal.
• “The primary negative takeaway is that this deal contains a clause that the remaining balance (~$345MM) must be redeemed in cash in July 2023; we believe WEED may approach its US$200MM minimum liquidity covenant by late 2024,” Zamparo wrote, referring to the company ticker in the Toronto Stock Exchange. Zamparo maintains the Underperform rating.
• Despite over ~88% decline in value so far, Wall Street has a negative view on Canopy ( CGC ), with only two Buy ratings and 11 Sell ratings.

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