Catalysts and Risks

Canopy-specific news to look forward to:

• First break-even earnings (not a management priority but should happen sooner or later – increasing revenue, customer base and average daily orders, market share leader, etc.);

• First earnings showing a full quarter with higher-margin oils sales (August? Sept?);

• Peace Naturals lawsuit resolution;

• More international (e.g., South America, Jamaica - Linton stated Canopy should be operating in several countries by the end of 2016 - right now they are doing business in four countries);

• Possible acquisition (which could come at any time, no good way to prepare for an announcement);

• The company will likely pursue a U.S. listing at some point in the future (TWMJF is a non-sponsored ADR);


Industry possibilities to look forward to:

• New medical laws (by end of August);

• Taskforce recommendations (November);

• Introduction of recreational legislation (Spring 2017);

• Adoption of recreational legislation (likely in 2018);


Canopy-specific risks:

• Possible additional equity offerings (share dilution in future) (Linton stated June that he wants to double or triple capacity);

• If their margins end up being so low that even though they have massive production and sales volume they are unable to make a significant profit;

• They could be subject to a hostile takeover (from a big pharma or maybe a tobacco corp);


Industry threats:

• If new medical laws / MMPR are somehow unfavorable (although one of Canopy’s founders was until recently the CFO of the ruling party, so they likely have some influence) (additionally it seems that McLellan is part of a law firm which represents many of the LPs);

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As expected, this year has seen Canopy stock rise on a number of predictable catalysts. One can never know for sure how the stock will react, how the news will be perceived by the market, or what the news will be, precisely, in advance. However, for anyone paying attention to the company (and particularly the statements of CEO Bruce Linton) as well as the macro environment (particularly government announcements), it is possible to guess what might move the stock upward. It is hard to think of what might move it downward given what we can look forward to over the next several months. Of course I am treating this stock as a long-term investment - however, even if you're interested purely in day trading, this will still probably be of some use to you. Other catalysts come without warning, such as when the partnership with Snoop Dogg was announced. That moved the stock considerably, which is why I always maintain a sizable core position, trading around it but never relinquishing a majority of my shares.

Many of us investor/observers guessed that Canada would take the opportunity to announce to the UN that they would be moving forward with legalization during UNGASS in April. They did so and there was a nice bump. The first Allard announcement saw a small spike on the build-up, which quickly dissipated. Linton has stated several times that Canopy wants to become a global brand, and shareholders have been rewarded with news of partnerships in Australia, Brazil and Germany.

Here is a partial list of some predicted catalysts which have already passed.  Hopefully you made money on each of them!

• Germany announcement (maybe small, medical-only, but international) (by end of June?);

• Earnings reflecting first oils sales since begun late February (end of June);

• TSX uplisting (by September?);

• Other international (e.g., South America);

• Taskforce composition announcements;