Last summer, Canopy Growth’s survival was in doubt. Shares of the Canadian cannabis company are up about 114% this week.
Germany took the measure on Friday decriminalization possession and cultivation of cannabis at home starting April 1. The measure received final approval in the Bundesrat, the upper house of the German parliament, after some uncertainty.
“The removal of the narcotic status of cannabis is expected to accelerate the growth of the German medical cannabis market,” the company said in a statement.
Canopy, whose butt grew by almost 36% on Friday after the news, owns German evaporator firm Storz & Bickel, giving it access to Europe’s largest economy. The company also offers medical cannabis products through its Canopy Medical division.
Friday’s rally was an addition to the previous one, sparked by US President Joe Biden’s State of the Union address on March 7, in which he mentioned cannabis restructuring. Vice President Kamala Harris followed by saying the “absurd” Schedule I classification of marijuana, which includes heroin and LSD, should be moved “as soon as possible.”
Other cannabis companies, including Tilray Brands and Cronos, also jumped following the news from Germany.
Low times
Things looked much bleaker for Canopy last summer. In late June, Benchmark analyst Mike Hickey cut the company’s price target to zero, saying it “may not be able to continue as a going concern and meet its financial obligations.” At the time, Canopy shares were down 78% for the year, and the company acknowledged going concern risks in its annual report.
Benchmark wasn’t the only company to warn about Canopy’s prospects. CIBC Capital Markets analyst John Zamparo wrote that the company is “burning cash despite numerous cost-cutting programs,” adding that even the legalization of marijuana in the U.S., if it happens, “won’t help.”
Last February, Canopy cut its workforce by 60%. CEO David Klein cited competition from Canada’s black market, which he estimates accounts for 40% of the country’s cannabis sales.
“There are two very different cannabis markets in Canada today,” he said at the time. “The one that is legal, highly taxed and regulated, and the one that is thriving and illegal.”
Canada legalized recreational use of marijuana in 2018, the same year beer and wine giant Constellation spent $3.8 billion for a 38% stake in Canopy. This deal caused Canopy’s market value to skyrocket. same league as Aircraft manufacturer Bombardier Inc.
Frustration and uncertainty followed, but Canopy now appears to be on a more secure footing.