Canopy Growth, the largest publicly traded marijuana company, fell short of Wall Street's earnings expectations on Tuesday, but news of a new investment overshadowed the larger-than-expected loss.
Shares of the Canadian company surged more than 22% in trading Wednesday after Canopy announced Constellation Brands - the $42 billion company behind Corona - had upped its investment in the marijuana grower by $4 billion and now owns a 38% stake.
Canopy Growth said in a press release that the proceeds will allow it to "strategically build and/or acquire key assets needed to establish global scale in the nearly 30 countries pursuing a federally permissible medical cannabis program, while also rapidly laying the global foundation needed for new recreational cannabis markets."
In an interview with Business Insider in July, Canopy Growth's CEO, Bruce Linton, explained he wouldn't have chosen just any alcohol brand to work with, but that Constellation's entrepreneurial spirit made it stand out despite its $42 billion market cap.
"Part of the reason we like them isn't just because they're a diversified beverage maker - meaning they do beer, wine, and spirits - but because they're actually entrepreneurial," he said.
"Why are you having a beverage on a Friday night? It's about a social lubricant. I think they didn't view themselves as a beverage company so much as an entity that provides those occasions with some kind of lift if you will - and that's an easy way to look at cannabis, not as a threat, but as an alternative or additional."
Constellation shares rose about 3.7% in early trading following the announcement.
For the first quarter of 2019 (ended June 30,2018), Canopy posted a loss of $0.40 a share, far outpacing the $0.11 loss that was expected. Revenue also fell short of the expected $26.33 million, at $25.9 million.
"With our unparalleled success in Canada and Europe, Spectrum Cannabis' expanding global operational footprint now covering 11 countries, our active regulatory and global market development efforts, as well as approvals to proceed with the first of many planned clinical trials of cannabis-based medical therapies for both humans and animals, our leadership position in international medical cannabis markets continues to strengthen," Bruce Linton, Canopy's chief executive, said in a press release.
Linton also said 36% of Canopy's total supply was now committed to its home country of Canada. When Canada's government voted to legalize marijuana throughout the country earlier this year, Canopy's stock surged. But in as nascent an industry as cannabis, shares took a 5% hit on Tuesday when the province of Ontario, home of Canada's largest city, said it would delay the roll out of private retail stores.
Wednesday's gains, if materialized when markets open, could easily take Canopy's stock price past Wall Street's $30 target, as high as $37.
Canopy is up 29% this year.
*An earlier version of this article misstated the size of Constellation's $4 billion investment.
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