Shutterstock
Now playing
04:50
The vaping crisis has been terrible for legal weed companies
Now playing
02:04
These pot stocks are poised to win big under Biden
LOS ANGELES, CALIFORNIA - JUNE 04: Drake attends the LA Premiere Of HBO's "Euphoria" at The Cinerama Dome on June 04, 2019 in Los Angeles, California. (Photo by Frazer Harrison/Getty Images)
Frazer Harrison/Getty Images North America/Getty Images
LOS ANGELES, CALIFORNIA - JUNE 04: Drake attends the LA Premiere Of HBO's "Euphoria" at The Cinerama Dome on June 04, 2019 in Los Angeles, California. (Photo by Frazer Harrison/Getty Images)
Now playing
00:54
Drake launches cannabis company
Now playing
00:55
Bruce Linton says Canopy Growth terminated him
Now playing
01:49
Why this pot investor compares cannabis today to the end of Prohibition
Section grower Corey Evans walks between flowering marijuana plants at the Canopy Growth Corporation facility in Smiths Falls, Ontario, Canada, January 4, 2018. Picture taken January 4, 2018. To match Insight CANADA-MARIJUANA/INNOVATION   REUTERS/Chris Wattie
Chris Wattie/Reuters
Section grower Corey Evans walks between flowering marijuana plants at the Canopy Growth Corporation facility in Smiths Falls, Ontario, Canada, January 4, 2018. Picture taken January 4, 2018. To match Insight CANADA-MARIJUANA/INNOVATION REUTERS/Chris Wattie
Now playing
03:10
Why cannabis stocks are soaring
Now playing
01:36
His business is alcohol, but he sees a future in cannabis
Canopy Growth CEO Bruce Linton hands Ian Power, who is first in line to purchase the first legal recreational marijuana after midnight, his purchases at a Tweed retail store in St John's, Newfoundland and Labrador, Canada October 17, 2018.  REUTERS/Chris Wattie
Chris Wattie/Reuters
Canopy Growth CEO Bruce Linton hands Ian Power, who is first in line to purchase the first legal recreational marijuana after midnight, his purchases at a Tweed retail store in St John's, Newfoundland and Labrador, Canada October 17, 2018. REUTERS/Chris Wattie
Now playing
01:37
Marijuana is now legal across Canada
An Israeli agricultural engineer inspects marijuana plants at the BOL (Breath Of Life) Pharma greenhouse in the country's second-largest medical cannabis plantation, near Kfar Pines in northern Israel, on March 9, 2016.
The recreational use of cannabis is illegal in the Jewish state, but for the past 10 years its therapeutic use has not only been permitted but also encouraged. Last year, doctors prescribed the herb to about 25,000 patients suffering from cancer, epilepsy, post-traumatic stress and degenerative diseases. The purpose is not to cure them but to alleviate their symptoms. Forbidden to export its cannabis plants, Israel is concentrating instead on marketing its agronomic, medical and technological expertise in the hope of becoming a world hub in the field.
 / AFP / JACK GUEZ        (Photo credit should read JACK GUEZ/AFP/Getty Images)
JACK GUEZ/AFP/Getty Images
An Israeli agricultural engineer inspects marijuana plants at the BOL (Breath Of Life) Pharma greenhouse in the country's second-largest medical cannabis plantation, near Kfar Pines in northern Israel, on March 9, 2016. The recreational use of cannabis is illegal in the Jewish state, but for the past 10 years its therapeutic use has not only been permitted but also encouraged. Last year, doctors prescribed the herb to about 25,000 patients suffering from cancer, epilepsy, post-traumatic stress and degenerative diseases. The purpose is not to cure them but to alleviate their symptoms. Forbidden to export its cannabis plants, Israel is concentrating instead on marketing its agronomic, medical and technological expertise in the hope of becoming a world hub in the field. / AFP / JACK GUEZ (Photo credit should read JACK GUEZ/AFP/Getty Images)
Now playing
02:28
Why weed is stuck in a legal limbo
Now playing
03:34
Canopy Growth co-CEO explains deal with Acreage
Now playing
05:27
Canopy Growth co-CEO: Product opportunity is 'substantial'
Now playing
06:11
Cronos CEO: 'Watershed moment' for marijuana
Now playing
03:48
Canopy Growth CEO optimistic the US market could open up
CNN
Now playing
02:17
Cannabis comes to Fifth Avenue
San Francisco CNN Business —  

The world’s largest cannabis company by market cap is getting smaller in size by shuttering 3 million square feet of greenhouses.

Canopy Growth on Wednesday afternoon announced plans to close two cultivation facilities in British Columbia, resulting in the layoffs of 500 employees. The company also scrapped plans to open a greenhouse in Ontario.

“Nearly 17 months after the creation of the legal adult-use market, the Canadian recreational market has developed slower than anticipated, creating working capital and profitability challenges across the industry,” the company said in the statement. “Additionally, federal regulations permitting outdoor cultivation were introduced after the Company made significant investments in greenhouse production.”

Canopy Growth (CGC) has an outdoor cultivation site that is more cost-effective, the company said.

North America’s largest cannabis companies have struggled as their operational growth far exceeded the actual development of the cannabis industries. Companies, like Canopy Growth, have since taken drastic actions to scale back to ensure near- and long-term profitability.

The site closures in Aldergrove and Delta, British Columbia – which account for more than half of Canopy Growth’s cultivation operations in Canada – are expected to result in a C$700 million to $800 million pre-tax charge on Canopy Growth’s earnings in the quarter that will end March 31. The company said it’ll likely incur other charges resulting from its organizational and strategic review.

Shares of Canopy fell nearly 2% in after-hours trading.

W. Andrew Carter, a Stifel analyst who covers Canopy Growth, said he was not surprised by the announcement.

“We believe the company carefully considered its cultivation footprint for both current and future needs,” Carter said in a note to investors. “But with 15 million square feet of licensed cultivation [in Canada] alongside the option for outdoor growing, there is limited value for indoor production particularly greenhouse cultivation.”