Is Canopy Growth Corp. Facing A Shutdown Of Their Ontario Facility?

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The COVID-19 outbreak has had a significant impact on the global economy and many countries are still dealing with major outbreaks.

The US is the epicenter of COVID and has the highest number of confirmed cases in the world. Unfortunately, the trend seems to be getting worse and we are closely following how the government handles the outbreak.

Although Canada is one of the countries that seems to have the COVID crisis under control, many companies are still being impacted by the virus. Canopy Growth Corporation (WEED.TO) (CGC) is a leading cannabis producer and it recently announced that an employee at its Ontario facility has tested positive for the virus.

According to Jordan Sinclair, the company’s vice-president of communications, the last time the employee was at work was on June 25th. Following the positive test, Canopy Growth has taken action and has tested employees that came in contact with the employee that tested positive for the virus.

Sinclair said the company has been screening employees for COVID-19 symptoms, increasing facility cleanings, and limiting the number of workers present at any given time. After the positive test, the facility has remained operational and Canopy Growth has been allowing all workers who can complete their jobs from home to do so since mid-March.

Canopy Growth is one of the largest cannabis producers in the world and is by far the best capitalized. Although the company has taken the necessary precautions to try and prevent the spread of the virus, the one positive test highlights the risk that cannabis companies are facing.

For smaller cannabis companies, we believe that the risk of spreading COVID is even more significant. Many of these companies operate small facilities where people cannot be more than 6 feet from each other. Although we are favorable on how Canopy Growth handled the situation, we believe that smaller operators are more interested in profits and are less concerned about COVID.

Since cannabis is legal at the federal level in Canada, companies and employees have access to benefits like health and property insurance. In the US, companies and employees do not have the same benefits and we believe that a COVID outbreak at a US facility would be much more costly than it would be in Canada.

Going forward, we are interested in seeing how the COVID crisis plays out with both large and small cannabis companies. Like cannabis, the COVID crisis is different on a state-by-state basis and we expect some markets to be more impacted than others. As an investor, we always look into the geographic diversity of a business and believe that this is even more important in the cannabis sector.

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