Canopy Growth Extends Reach with Newfoundland Supply Deal

Shares of Canopy Growth Corporation (TSE:WEED) climbed on Friday after the cannabis producer announced its largest provincial supply agreement yet

SmallCapPower | December 11, 2017: Canopy Growth Corporation (TSX:WEED) shares surged over 6% on Friday after announcing a cannabis supply agreement with the Province of Newfoundland and Labrador. This deal marks the largest provincial cannabis supply agreement announced to date for Canopy Growth. In September, the Company had signed a 4,000-kg annual supply agreement with the province of New Brunswick.

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Under the terms of the agreement, Canopy Growth will supply 8,000 kg of cannabis products annually for the first two years of the deal. The Company will establish a new production facility in Newfoundland and Labrador capable of producing 12,000 kg per year, bringing 145 jobs in an emerging sector and major capital investment to the region by 2019.

Additionally, Canopy’s wholly-owned subsidiary, Tweed, will be eligible to apply to operate four new retail locations in the province. This would be a major milestone for Tweed, a leading brand in the cannabis industry. These four licenses would represent the first announced privately-owned and operated legal cannabis retail locations in the country. Canopy Growth and Tweed are also seeking retail locations at their production facilities in other provinces, a common practice for breweries and wineries across Canada.

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Bruce Linton, Chairman & CEO of Canopy Growth, said “The Newfoundland and Labrador retail framework will allow us to take our existing e-commerce business and well-recognized house of brands including Tweed, DNA Genetics, Leafs By Snoop, and our CraftGrow program, and present that pride and dedication in a “brick and mortar” retail environment. I want to congratulate the Government of Newfoundland and Labrador for choosing a retail model that encourages local growth and a made-at-home experience, while balancing private and public involvement.”

Canopy Growth shares have surged over 110% in the past three months following the increased investor interest in the cannabis space as Canada’s legalization date is approaching. Canopy Growth currently trades at a high Price to Sales ratio of 75.98x, which is relatively lower as compared with the ratios of Aurora Cannabis (136.83x) and Aphria (92.05x).

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