Canopy Growth Shares Navigate Regulatory Shifts and Acquisition Plans

After a significant rally, shares of Canopy Growth Corporation have recently pulled back. The stock, which had surged approximately 90% since late November, faced profit-taking pressure. It closed its latest session at $1.32, marking a single-day decline of 10.8%. This movement reflects a market reassessing two major developments: the implications of a historic U.S. presidential directive on marijuana classification and the details of a planned acquisition.

Last Thursday, an executive order titled "Increasing Medical Marijuana and Cannabidiol Research" was signed. This directive instructs the U.S. Attorney General to initiate the process of reclassifying marijuana under the Controlled Substances Act from Schedule I to Schedule III. Such a shift would represent the most substantial change in federal cannabis policy in over five decades.

The market's response illustrated a classic "buy the rumor, sell the news" pattern. Canopy Growth's stock, which had been in high demand in anticipation of the announcement, fell roughly 12% on the day of the signing. Many participants had seemingly expected an immediate, direct reclassification. In reality, the order begins a formal administrative procedure with an estimated timeline of 12 to 18 months.

A move to Schedule III would carry several tangible benefits for Canopy Growth and its peers:

• The elimination of restrictions under IRS code Section 280E, allowing standard business expenses to become tax-deductible.
• Improved access to banking services and the potential for lower financing costs.
• Facilitated pathways for medical cannabis research.
• The potential inclusion in a proposed Medicare pilot program for CBD-based treatments.

However, the order does not address federal legalization for recreational use. Industry forecasts project the U.S. recreational market will reach about $42.8 billion by 2028, within a total retail volume of roughly $56.9 billion. This largest segment of the market therefore remains federally prohibited for now.

Strategic Expansion Through Acquisition

On December 15, Canopy announced a definitive agreement to acquire MTL Cannabis Corp. The transaction values MTL at an equity value of approximately CAD $125 million (fully diluted), representing an enterprise value of around CAD $179 million.

Deal Terms and Integration

Key terms of the agreement include:

• A payment of 0.32 Canopy shares for each MTL share.
• An additional cash consideration of CAD $0.144 per MTL share.
• An expected closing date no later than the end of February 2026.
• MTL's CEO, Michael Perron, is slated to join Canopy as Chief Operating Officer.

The companies anticipate realizing annual synergies of roughly CAD $10 million within 18 months of closing.

Rationale for the Deal

Canopy leadership states that MTL brings several strategic assets:

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• Recognition as Canada's number one budtender-recommended brand in the 2024 Brightfield study.
• A profitable operation with demonstrated cultivation expertise.
• An enhanced presence in the Québec market.
• A complementary portfolio for both medical and recreational cannabis segments.

Canopy CEO Luc Mongeau emphasized that MTL contributes "experienced operators, strong brands, and a profitable business" intended to strengthen the company's position in Canada's medical market and key recreational markets.

Financial Performance and Metrics

For its second quarter of fiscal year 2026 (ended September 30, 2025), Canopy reported several operational improvements:

• Canadian recreational cannabis revenue increased 30% year-over-year.
• Canadian medical cannabis revenue rose 17% year-over-year.
• The adjusted EBITDA loss narrowed to CAD $3 million.
• The company held CAD $298 million in cash, approximately CAD $70 million more than its total debt.
• A current ratio of 5.5 indicates comfortable liquidity.

The loss per share was CAD -$0.01, significantly better than the consensus estimate of CAD -$0.11. However, quarterly revenue of CAD $66.68 million fell short of the analyst forecast of CAD $71.82 million.

Analyst Sentiment and Insider Activity

The average Wall Street rating for the stock is currently "Hold." Recent analyst actions include:

• Benchmark upgrading its rating from "Sell" to "Hold" in November.
• Alliance Global Partners maintaining a neutral stance.
• Roth MKM reiterating a "Buy" recommendation.

Institutional investors hold about 3.33% of the company's outstanding shares. Notably, CEO Luc Mongeau purchased 27,469 shares in September 2025.

Technical Picture and Risk Assessment

The stock's 50-day moving average sits at $1.26, with the 200-day average at $1.31. Canopy's market capitalization is approximately $565 million, a figure that follows a decline of nearly 99% over the past five years from its peak during the earlier cannabis investment boom.

Key risk factors for the company remain:

• Persistent net losses, with a net margin of approximately -113%.
• Uncertainty regarding the specifics and timing of the U.S. reclassification process.
• Intense competition in the Canadian market and limited access to the larger U.S. business.
• Share dilution risk stemming from a history of repeated capital raises.

Upcoming Catalysts

The company's next quarterly report is expected in early February 2026. This update will provide insight into whether Canopy can continue its path toward profitability and advance the integration of MTL Cannabis as planned. Additionally, the role of its U.S. subsidiary, Canopy USA, will come into sharper focus as the potential for Schedule III reclassification requires translation into concrete business models and revenue streams.