Published July 3, 2019 | By Nick Thomas

Bruce Linton, who is out as co-CEO of Canopy Growth, speaks at the inaugural MJBizConINT’L in Toronto in August 2018.

Former Canopy Growth co-CEO Bruce Linton may have had suspicions about his future when a special board meeting of the Canadian cannabis giant was convened last Friday.

Even though Linton was also Canopy’s chair, he didn’t call the meeting.

By Wednesday, Linton was filling up his car with gas at Costco and contemplating his future job prospects after being fired from his role at the helm of the largest cannabis company in the world – one that has been losing money regularly.

“It won’t be in cannabis in Canada, but there is a pretty big world out there,” he told CNBC about his immediate future. “Tomorrow, maybe I’m working while you guys are on holiday.”

As the CEO who helped engineer the blockbuster $3.4 billion purchase of Acreage Holdings and a multibillion-dollar investment stake by U.S. alcohol giant Constellation Brands, Linton eventually took the heat for not making money quickly enough.

Constellation (NYSE: STZ) – the owner of popular brands including Corona and Robert Mondavi – first took a 9.9% stake in Canopy in October 2017 for CA$245 million ($183.75 million).

Then, in August 2018, the Victor, New York-based company upped that investment to a 38% shareholding, representing about a CA$5 billion stake.

And while the deal with U.S. multistate operator Acreage looks likely to remain on track after overwhelming shareholder approval last month, it seems the transformational nature of the Constellation investment has, at least temporarily, lost some of its luster.

Constellation CEO Bill Newlands – one of four Canopy board members with ties to the alcohol giant – clearly lost patience with Canopy’s red ink. And it was Linton, the face of the Smiths Falls, Ontario-based company, who took the fall.

During a June 28 conference call with analysts to discuss Constellation’s latest earnings report, Newlands let it be known he was “not pleased with Canopy’s recent reported year-end results.”

Last month, Canopy reported net revenue of CA$94.1 million and a net loss of CA$323.4 million for the fiscal quarter ended March 31, 2019. Annual net revenue, meanwhile, totaled CA$226.3 million, with a net loss of CA$670.1 million.

“He was spending a fortune. There was no plan to make money under Bruce,” Jim Cramer, the host of CNBC’s “Mad Money,” told the financial news network.

Alarm bells for those seeking mainstream partnerships?

The surprise firing of Linton, one of the most colorful figures in the cannabis world, could send shock waves through other North American cannabis companies seeking partnerships with big mainstream companies, whether it be alcohol, tobacco or other consumer packaged group (CPG) brands.

In an industry where few businesses are making money and where profitability is seen as at least a year or two off for most, Linton’s ouster could cause some second-guessing on the part of cannabis companies seeking such partnerships.

In short, patience could be thin for the big industry players seeking quick returns on their investment.

“The public markets typically don’t have time for an investment strategy based on long-term success,” Brett Hundley, senior equities analyst at New York-based Seaport Global, wrote in an investor note Wednesday.

“Additionally, larger strategic investors may see negative impacts to their own financial statements from such a strategy, and their vision of process, structure and evolution may differ from that of founders, accordingly.”

However, Greg Engel, CEO of New Brunswick cannabis company Organigram, isn’t worried.

He told Marijuana Business Daily last week that his Canadian company is “actively seeking a beverage partner.” He continues to do so, even in the wake of Linton’s firing.

“One of the big differentiators for us is that we have shown ourselves to be profitable,” Engel told MJBizDaily on Wednesday after Linton’s removal.

“We want to be attractive to a partner whether that is through a joint venture or an acquisition as that would be accretive to them immediately.”

Engel added that there were warning signs on the horizon about Linton’s future, given Newlands’ comments. “I have a lot of respect for Bruce and what he has done for the industry.”

What next for Canopy?

Whereto from here? With Constellation having a clear influence over Canopy’s future, it’s very possible the alcohol giant may tap a CPG veteran to lead the cannabis company.

The cannabis industry is increasingly hiring CPG expertise. Charlotte’s Web, one of the largest North American CBD producers, recently hired Kellogg executive Deanie Elsner as its new CEO.

Mark Zekulin, who became Canopy’s sole CEO as the board looks for a new leader, said he doesn’t plan to stay on after Linton’s replacement is found.

“I think it’s time to open the tent wide open,” he told Bloomberg. “There will be great internal candidates, and there will be great external candidates.

“I’m committed to being here long enough to make sure everything goes well and we have a smooth transition.”

That leaves plenty of room for Constellation to exercise its clout.

“They can get their own guy in there, and he is going to be better at this stage,” CNBC’s Cramer noted.

Nick Thomas can be reached at [email protected]

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