Alcohol giant Constellation Brands exercised warrants to acquire $174 million (C$245 million) worth of Canopy Growth shares in a move that further cemented the alcohol giant's commitment to cannabis. 

"While global legalization of cannabis is still in its infancy, we continue to believe the long-term opportunity in this evolving market is substantial," Constellation President and CEO Bill Newlands said in a statement. "Canopy is best positioned to win in the emerging cannabis space and we are confident in the strategic direction of the company under David Klein and his team."

Per terms of the deal, Constellation ($STZ) exercised about 19 million warrants to purchase about 5 percent of outstanding shares of Canopy ($CGC) at roughly $9.23 (C$13) per share. It's a significant discount for Constellation, which invested some $4 billion when shares were trading around $32 back in August 2018. In spite of the discount, securing substantial funding in the middle of a pandemic after a devastating year for the cannabis industry is a major vote of confidence, not only for Canopy but for the industry as a whole.

"This additional investment validates the work our team has done since attracting the initial investment in 2017. It also strengthens our ability to pursue the immense market and product opportunities available to Canopy in Canada, the U.S. and other key global markets," David Klein, Constellation veteran and Canopy Growth CEO, said in a statement.

Constellation has gradually increased its grip over the Canadian cannabis company since it first invested in 2017. Both CFO Mike Lee and Klein, who took the reins in January, are Constellation veterans. Under Klein's leadership the company has undertaken significant cost-cutting measures that analysts say position the company well for longevity.

In early March, Canopy Growth announced it would shutter two major cultivation facilities in B.C., laying off 500 in the process. 

At the time, Stifel analyst Andrew Carter applauded the decision as a thoughtful approach to cutting costs from a company with enough liquidity to do so. 

"It was all about grounding expectations and putting the impetus of success on themselves," Carter told Cheddar. "That I think is what really enamored investors."

More recently, the company announced more cutbacks, shuttering operations in Africa and streamlining cultivation operations in the U.S. and Latin America. Those cuts, Reuters reported, also meant the elimination of about 200 jobs in North America and the UK.

Analysts have interpreted these moves as signs of a change in tone at the company, which Cowen analyst Vivian Azer described as having "the strongest management team among the LPs." Cowen has an "Outperform" rating on Canopy.

Constellation's ongoing confidence in Canopy also says much about the cannabis industry overall, which struggled in the past 12 months amid crumbling capital markets and an illness linked to illicit vape products that sickened more than 2,800 in the U.S. and killed more than 65. The coronavirus pandemic is just the latest threat to the industry.

"The signal that STZ still plans to take control is a boost, not only for Canopy, but also the overall sector. It suggests STZ still believes in the long term value creation in the space," Jefferies analyst Owen Bennett wrote in a note. "With someone like STZ, that arguably has more intimate knowledge of the space now than many, not giving up, it gives hope to this respect."

Canopy shares surged about 10 percent after the news broke and traded higher on Monday.

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