What happened
Cannabis company Canopy Growth (CGC -1.57%) reported quarterly financial results this morning, but it was another major announcement that has the stock tanking today. At 11:40 a.m. ET, Canopy shares were down 16.4%.
So what
The Canada-based company is restructuring its business as it strives to attain profitability. Canopy Growth will shed its pot-growing assets and transition to a third-party sourcing plan, aiming to save more than $100 million over the next 12 months. The restructuring will also result in the reduction of its workforce by 60%.
Canopy had already begun cost-cutting initiatives last year that included the divestiture of its Canadian retail cannabis operations. Management now expects total annual savings will amount to as much as $230 million.
Image source: Getty Images.
Now what
The company is focusing on its goal of reaching profitability and believes the restructuring will keep it on track to break even on an adjusted EBITDA basis by the spring of 2024. Canopy CEO David Klein stated, "We are transforming our Canadian business to an asset-light model and significantly reducing the overall size of our organization. These changes are difficult but necessary to drive our business to profitability and growth."
For its fiscal 2023 third-quarter period, which ended Dec. 31, 2022, Canopy's loss more than doubled year over year to about $200 million. Revenue also decreased 28% from the prior-year period.
The company is continuing its strategy of entering the U.S. cannabis market through its U.S.-based holding company. That has included investments in multistate operator Acreage, cannabis edibles brand Wana, and California-based extract company Jetty. The company is pursuing its U.S. strategy without relying on any changes in federal legalization. Investors are clearly not impressed, however, as the latest moves likely strike some as a sign of desperation after Canopy had already set a plan to reach profitability.
