Shares of Canopy Growth Corp. (CGC) jumped more than 10% on Monday after the company said it has been granted a license by New York State to process and produce hemp.
Canopy Growth shares gained $4.24 to $42.49 in trading on the New York Stock Exchange after the company said it will establish large-scale production capabilities focused on hemp extraction and product manufacturing within New York state, the company said in a statement.
Canopy Growth plans to invest between $100 million and $150 million in its New York operations, “capable of producing tons of hemp” on an annual basis, Co-CEO Bruce Linton said.
A New Kind of Crop
Canopy Growth attributed the license to efforts by New York Governor Andrew Cuomo and U.S. Senator Charles Schumer, noting that Cuomo’s office helped create the Hemp Research Pilot Program, while Schumer’s was “instrumental” in the passage of the recent U.S. farm bill, that allows growers to produce hemp as an agricultural commodity.
The investment “is a true win-win for Canopy Growth, who will be positioned at the forefront of Upstate New York’s industrial hemp revolution, and for the Southern Tier’s economy and farmers, which will receive a major shot in the arm in new good-paying jobs,” Senator Schumer said in the release.
Charles Taerk, a co-founder of Faircourt Asset Management Inc., which oversees the Ninepoint Alternative Health Fund, noted that the 2018 Farm Bill signed into law by U.S. President Donald Trump on December 20, 2018 “removes hemp from the Controlled Substances Act, and allows state departments of agriculture to file hemp programs and regulate hemp cultivation per their state specific programs.
Coveted New York market
“This transaction further establishes Canopy as a first mover among Canadian LPs expanding its brand into the coveted NY CBD market, putting it in position to compete in the health and wellness market that includes CBD creams, oils and beverages.”
Canopy Growth will source hemp exclusively from U.S. farmers once its New York state operations are up and running. A site will be selected within the next three months, pending board approval.
Shares of New York-based beverage alcohol company Constellation Brands Inc. (STZ) also rose on Monday. The company recently completed a $4 billion investment in Canopy Growth, though its stock price has suffered due to the cost of financing the investment.