Canopy Growth’s stock (CGC) tumbled by more than 8% in early Friday trading, hurt by a disappointing quarterly earnings report that warned its impending merger with Acreage Holdings would result in a “material charge” to its 2020 results.
The world’s largest cannabis company by market capitalization reported C$94.1 million ($71.27 million) in net revenue for its fiscal fourth quarter. That topped analyst expectations of C$92.24 million, according to Bloomberg.
Yet earnings per share missed expectations by a wide margin. The company reported an adjusted C$0.98 loss per share compared to the C$0.32 per-share loss analysts had been expecting.
On Wednesday, Canopy’s agreement to acquire New York-based multi-state operator Acreage Holdings (ACRGF) overwhelmingly passed a shareholders vote. It sets both companies up to merge, whenever the sale of marijuana becomes federally permissible in the U.S.
However, Canopy cautioned investors that the Acreage acquisition could lead to a charge that would have a “materially negative impact on net income in the first quarter of fiscal 2020.”
The stock, traded on the New York Stock Exchange, traded near $40, off by 8% from Thursday’s close.
Adding to the bad news was a slump in Canopy’s adjusted gross margin for the quarter ended March 31, which plummeted to just of 16% which was down from 22% in the prior quarter and also below the consensus estimate of 24%.
Still, the company ended the quarter with a giant cash position of $4.5 billion, still boosted by the 2018 $4 billion investment from Corona maker Constellation Brands (STZ).
Canopy now has hemp cultivating operations owned or contracted across New York, California, Colorado, Kentucky, North Carolina, Oregon and Pennsylvania.
Canopy Growth CEO Bruce Linton previously told Yahoo Finance the company had planned to expand hemp plans to seven U.S. states earlier in June.
Watch Canopy Growth CEO Bruce Linton discuss the latest quarter on Yahoo Finance’s YFi PM at 1PM EST Friday.