Canada is fast becoming the Great Green North, as foreign cannabis companies look to go public in the only G7 country allowing medical and recreational marijuana sales.
In the United States, in particular, cannabis businesses are desperate to get infusions of cash to establish a competitive presence in its fast-growing market. In recent months, companies such as MedMen, Liberty Health Care and Chalice Farms have listed on the Canadian Securities Exchange.
This is a way for these companies to raise capital and get attention from wealthy investors in Asia, Europe and Australia. Many would-be investors want to put money in the cannabis industry, but are wary of the U.S. federal prohibition.
“If you don’t get in and get on, you’re out. Time is of the essence. You need money now, and you need it yesterday,” says William Simpson, founder of Chalice Farms, an Oregon company, in an interview with Associated Press.
In 2017 a publicly traded Canadian company called Golden Leaf Holdings acquired Chalice Farms. And it’s using the US$19.5 million raised in its public listing to make cultivation deals in Nevada and California.
There are now about 90 publicly listed cannabis companies in Canada, which have a valuation of about $31 billion.
Colombian Medical Marijuana Also Turns to Canada for Financing
Known for its robust illegal drug industry, Colombia is also seeking to go legit with a comprehensive framework to boost its medical marijuana industry. You may not realize it, but Colombia is the second-largest federally regulated medical marijuana market in the world, after Germany.
Colombian cannabis companies are viewing Canada’s secure and well-moneyed stock exchanges as good places to go public. In May, Khiron Life Sciences became the first Colombian medical cannabis company to list on the Canadian TSX Venture Exchange, trading under the symbol KHRN. PharmaCielo is another Colombian company that may list in Toronto soon, as it finishes a reverse takeover with AAJ Capital 1 Corp.
“It means capital markets are accepting Colombia as a valid market for medical cannabis. It’s a validation that’s important for the whole of Colombia,” says Alvaro Torres, Khiron Life Sciences CEO and co-founder, in an interview with Marijuana Business Daily.
Citing Colombia’s strength as an investment market, too, Torres claims that their companies can cultivate cannabis products of equal quality to Canada’s at much lower cost. Also, Colombia has a potential patient market for medical marijuana of almost 5.5 million people.
Canadian Cannabis Starts to Eye Opportunities Abroad
And in the reverse situation, U.S. cannabis companies can’t list on their own stock exchanges because of the federal prohibition, but Canadian companies are freed from this constraint because their business is legal in the country where they’re based.
In March, Canadian licensed producer (LP) Cronos Group became the first cannabis company to list on New York’s Nasdaq exchange. Competitors Canopy Growth and Aurora Cannabis say they’re seeking Nasdaq listings as well.
While Cronos won’t physically enter the United States until cannabis is legal federally, it looks at the Nasdaq listing as a preemptive strategy. “We’re able to then get U.S. investors in while we’re still in the early days and have that support when we operationally enter the U.S.,” explains Cronos CEO Mike Gorenstein.
Last July, British Columbia-based LP Tilray became the first pure-play cannabis business to complete an IPO on a major U.S. stock exchange when it started trading on Nasdaq. Its listing raised US$153 million, and the company’s stock rocketed up almost 33% on its first day of trading.
And the United States is only the start. The fast-growing cannabis industry in Canada has been given a boost by recent mergers and acquisitions such as Edmonton, Alberta-based Aurora Cannabis agreeing to acquire MedReleaf for $2.9 billion.
Industry observers feel that countries like Spain, Italy and Germany could provide growth opportunities for the new giants. Germany, for example, is currently the world’s largest medical marijuana market, with its government reimbursing patients for cannabis used to treat a wide variety of conditions.
Other Countries May Follow Suit With Cannabis Legalization & Investment
As other countries look at the explosion of investment in cannabis companies on Canadian stock exchanges, some may feel increasing pressure to follow suit.
For example, in Spain and The Netherlands, where cannabis can be bought at licensed cafes, the next logical step would be to make marijuana use legal.
In France, mandatory sentences for minor marijuana crimes have been eliminated and President Emmanuel Macron has made noises about changing the country’s cannabis laws— perhaps a prelude to legalization.
In 2000, Portugal decriminalized all drugs and started treating addiction as a medical issue rather than a crime. Legalizing cannabis recreationally may be a logical next step.
And even the United States continues to make forays into legalization. The hard-nosed federal attitude towards cannabis legalization may be softened by necessity as more states legalize medical and recreational marijuana use.
If that happens, keep in mind that states such as California and Florida are both larger than the entire Canadian marketplace. Investment in marijuana businesses will explode. Those who have gotten in on the ground floor in Canada could reap the benefits of early investment.
Photo credit: Matteo Paganelli