Canadian Pot Company is Trading on the NYSE
Marijuana is legal in Canada, and the Canadian company, Canopy Growth Corporation, only operates there, so the NYSE allowed the listing.
Canopy Growth Corporation at the NYSE
Why would a marijuana company want to go public?
The same reason other start-ups offer stock: to grow, they need a financial infusion.
What? Aren’t cannabis sellers languishing in cash?
Yes and no. Yes, many marijuana companies are raking in the big bucks. However, like other entrepreneurial adventures, additional capital is needed for expansion.
What about U.S. cannabis companies? Are they listed on the NYSE?
No. As I’ve mentioned in previous blogs, the U.S. government classifies marijuana as a Schedule 1 drug, which means the justice department believes there is no medicinal value in pot, and therefore, cannabis is an illegal drug. Since it’s illegal federally, marijuana companies are not allowed to trade on the NYSE. Nor can they borrow money from banks or raise cash from institutional investors. The Toronto Stock Exchange, Canada’s top trading venue, does not allow pot companies that operate in the U.S. to list either.
The Toronto Stock Exchange
What can marijuana companies do?
They rely on hedge funds or wealthy individuals for investments. The problem is, there aren’t enough to support the growing demand.
What other option(s) are available?
According to an article in the May 27, 2018 edition of the Los Angeles Times, cannabis companies are executing public offerings through the Canadian Securities Exchange, a second-tier stock market in Toronto.
The article, written by James Rufus Koren, reported: “…cannabis companies are flocking north because they see the Canadian stock market as a source of cheap and abundant capital.”
Dan Nicholls, a director at the Century City cannabis advisory firm Ello, said, “You might see 100 new companies go public on the CSE. Everyone is looking at Canada…It’s going to be a massive rush.”
Mark Hiraide, a Los Angeles attorney, specializes in capital transactions. “The money is cheaper in the public markets. Companies can raise more cash while the founders give up less ownership and control.”
The marijuana industry is evolving.
The supply business started with drug dealers doing selling illegally on the black market, (and many low-level dealers still exist in legal and illegal markets), then came the mom and pop stores, the dispensaries, followed by cannabis retailers who created sleek, “Apple-like stores.” Now, many local businesses want to become national, name-brand enterprises, using top-retail locations and creating cache through their recognizable packaging: think Tiffany’s Robin’s egg blue color. (I call it aqua.)
These forward-thinking companies want to replace the industry’s “stoner” image with upscale clientele—including professionals, parents, and grandparents— i.e., like the wine connoisseurs.
Fox Business News reported that New York cannabis investment firm, Acreage Holdings, also plans to go public. What’s noteworthy is how the industry is becoming socially acceptable: former House Speaker John Boehner and former Massachusetts Governor William Weld have joined Acreage Holding’s advisory board.
The Los Angeles Times article cited the marijuana company, MedMen, as an example. The company owns or operates a dozen shops in California, New York, and Nevada as well as facilities to feed the stores. MedMen’s co-founder and chief executive, Adam Bierman, believes that location is critical. He said, “How do you become the trusted brand in the hearts and minds of the marijuana users of tomorrow? You do it on Fifth Avenue; you do it in Beverly Hills.” MedMen operates a dozen cannabis shops including outlets on Robertson Boulevard in Beverly Hills, Santa Monica Boulevard in West Hollywood, a Fifth Avenue shop across the street from Lord & Taylor’s flagship store in NYC, and they are opening a new location on the Las Vegas Strip.
MedMen’s store in NYC
Bierman believes acquiring capital quickly is key to MedMen’s future success. He said, “It’s land-grab time…as crazy as it sounds to the outside world, 90 days in my world is like five years. In 90 days I can open three more stores, buy an extra license in a new market—I can do a lot.”
Cannabis companies need capital.
Bierman also said, “People are buying billions of dollars of weed right now, most of it illicit. What we’re saying is, if you provide people a safe, clean environment, where there isn’t a threat of jail, I bet they’ll buy more. That’s not much of a leap.”
On May 29, 2018, Bloomberg reported that MedMen Enterprises’s deal to go public in Canada will be a $1.65 billion valuation, offering $100 million worth of shares.
For the record, I’m not a “get high” kind of individual. Neither do I drink—well, maybe a piña colada once or twice a year—; my point is the marijuana industry is becoming mainstream, and the NYSE is losing out on fast-growing market opportunities.
Thanks for reading.
What do you think? Do you believe cannabis companies should be allowed to trade on the NYSE?
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