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Constellation Brands Warns Of Loss From Investment In Canopy Growth

Brewer Constellation Brands Inc (STZ,STZ-B) has warned it expects to incur a loss of about $54.3 million in the latest quarter from its billion-dollar investment in Canadian cannabis company Canopy Growth Corp. (CGC, WEED.TO).

Constellation Brands acquired a 9.9 percent stake in Canopy Growth in October 2017, as it sought to gain a foothold in the recreational marijuana market. The beer and wine giant later raised its stake in Canopy Growth to 38 percent in August 2018 after it announced an investment of C$5 billion, or $4 billion.

In a filing with the Securities and Exchange Commission earlier this week, Constellation Brands said it recognizes equity in earnings or losses from its equity method investment in Canopy Growth on a two-month lag.

Accordingly, Constellation Brands will recognize its share of Canopy Growth's results of operations for the three-month period from April 1 through June 30, 2019, in its consolidated financial statements for the three months ended August 31, 2019.

Constellation Brands said that in its fiscal second quarter ended August 31, 2019, its share of Canopy Growth's losses will be $54.3 million on a net basis.

Constellation Brands also said in the filing that its current stake in Canopy Growth is 35.6 percent.

Canopy Growth has not recorded a profit in any of the recent quarters, even as it has reported higher sales. Constellation Brands has told analysts it is not pleased with Canopy Growth's performance.

In July, Canopy Growth ousted its co-chief executive officer Bruce Linton and said that Mark Zekulin has agreed to become the sole CEO of the company.

Zekulin will work with the Board to begin a search to identify a new leader to guide the company in its next phase of growth, which will include both internal and external candidates, Canopy Growth said.

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