Is Canopy Growth hiding (another) total crop failure from their shareholders?

The internet exploded with rumors this past weekend that Canada’s number one Licensed Producer, Canopy Growth Corporation (TSX:WEED) (NASDAQ:CGC) suffered from what some are calling a “total crop failure” at their Aldergrove, B.C. facility. In a statement, the company denied those rumors, saying regulatory delays led to the planned destruction of the plants in question. However, video quickly surfaced of what appeared to be thousands of dead cannabis plants, leading some in the industry to speculate that it could lead to the destruction of shareholder value.

The rumor mill started on Twitter

On Thursday, Twitter users began to see reports that Canopy’s BC Tweed facility had a complete crop failure, with some outlets reporting total lost product upwards of 15 tons. Early reports came from industry insider and the founder of Oregon-based Harvest Moon Cannabis dispensaries, an often outspoken industry critic who goes by the handle “Betting Bruiser.”

EXCLUSIVE: @CanopyGrowth Aldergrove B.C. Facility 2nd Time Facility suffers TOTAL crop failure. Over 1M Sq. Ft. & 200k+ Plant’s & 15,000 KG & $45M Rev - LOST. NOT Material Info? They released a video celebrating this ACCOMPLISHMENT? @SnoopDogg $CGC $WEED $STZ #PotStocks pic.twitter.com/HKLTUyeUvK

— Betting Bruiser (@BettingBruiser) September 27, 2018

 

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Canopy was quick to respond with a statement, citing regulatory issues as the main reason behind what the company deemed the necessary destruction of some plants.

“Processing licences were delayed by infrastructure and regulatory approvals, which led to a number of plants needing to be destroyed,” read the statement. “Management does not consider this event to represent a material impact on the company's balance sheet and fully anticipates being able to meet provincial supply agreements during the first year of recreational legalization.”

The evidence piles up against Canopy

As Twitter users are wont to do, they quickly cried foul on the claims, prompting Bruiser to upload what he claims to be a video of the facility. In the video, one can clearly see row after row of dead and dried out cannabis plants.

For those claiming picture is fake or I made this shit up. You all have insecurity issues with your investments. Don’t attack the messenger. Talk to @KirkTousaw @adam_greenblatt and all others that made some BS video to hype this a success $CGC $WEED #PotStocks pic.twitter.com/moemkRhvqe

— Betting Bruiser (@BettingBruiser) September 27, 2018

 

Experts who saw the video agreed that this is what happens when plants don’t receive the proper care — in this case, not enough water. And while Canopy is sticking to their story, the internet continues to swirl with rumors — some plausible; some not so much — about what happened to the crop.

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Everything from claims that the grow became infected with botrytis to the facility is full of pathogens and molds due to poorly done retrofit jobs have now been floated over the past few days. Over-fertilization and fungi issue have made their way to the top of the list as well.

What this may mean for investors

Canopy Growth founder Chuck Rifici put his two cents into the mix this weekend, stating that if the rumors are true, it will be destructive to shareholder value. And while Canopy may be right, perhaps the issue is not as big of a deal as the internet is making it out to be (after all this is Twitter) the lack of transparency is concerning. Moreover, according to some sources, not only is this a facility that Canopy paid over half a billion dollars for a little over a year ago, but some speculate that this may not be the first time such an incident has occurred.

IF rumours of a near total crop loss at @CanopyGrowth's BC Joint Venture, which it acquired for half a billion dollars (+/- $100mm depending on current vs. at time of purchase SP), are true - it could be destructive of shareholder value. #FirstMover #Croptober

— Chuck Rifici (@crifici) September 27, 2018

 

The word on the web is that Canopy is keeping these issues off the books, which should concern shareholders to a degree. Investors have seen what volatility can do to cannabis stocks, after all, and Canopy is supposed to be a step above the rest.

Wonder what @jimcramer thinks now? Hey Jim can I call into today’s show? $WEED $CGC #PotStocks pic.twitter.com/1pLTeI9qoc

— Betting Bruiser (@BettingBruiser) September 27, 2018

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