Aphria Responds to TMX Group on US Cannabis Business

Aphria (TSX:APH)–alongside its partners in the US cannabis space Liberty Health Sciences (CSE:LHS)–released a response on Monday (August 21) regarding the clarification by the TMX Group on regulatory engagement for cannabis companies listed in Canada but with business activities in the US.
The statement from the TMX indicated it had engaged with the Canadian Securities Exchange to clear the securities of issuers with businesses in the US. The group said it will provide an update at a later date once it had cleared up the entire situation.
“We are working with regulators to arrive at a solution that will clarify this matter for issuers, investors, participants and the public,” the TMX said. They did, however, clarify there was no CDS (Canadian Depository for Securities) ban for cannabis stocks with business in the US.
This is due to Canadian cannabis companies listed on the TSX with potential or legitimate business opportunities in the States currently existing in a gray space when it comes to the legal terms of cannabis. In the US cannabis is illegal on a federal level, however, several states have legalized the drug and opened up business models for companies to sell either medically or in some cases even recreationally as well.

The role of CDS and the danger of a potential ban

As reported by the Globe and Mail, in the article that featured an interview with Lou Eccleston, CEO at TMX Group, in which the potential of a CDS ban was proposed, the value of CDS ensure that trades in the market end up in the right spot.
“If CDS refuses to clear and settle trades in these cannabis stocks, it would make those companies unattractive to many investors, hindering parts of the budding marijuana industry,” the report indicated.
Vic Neufeld, president, and CEO of Aphria said he was pleased both with the confirmation of no CDS ban and the pursuit by the TMX to clear this situation further. Neufeld added they will continue their dialogue with the TSX and CDS for this.
“Aphria’s common shares have traded on the TSX and previously the TSX Venture Exchange for almost 3 years during which time we have raised over $216 million from investors by way of five offerings by short form prospectus, all of which have been settled by CDS, and we look forward to this continued support from the TMX Group,” Neufeld said in a statement.
Aphria doesn’t plan to slow down their US business. According to the company, both Aphria and Liberty are focused on their existing strategies related to the medical cannabis market in the two countries.
George Scorsis, CEO of Liberty said they are prepared to work alongside the TMX in order to clarify the situation for the two companies and “all Canadian capital market participants.”

Investor Takeaway

Aphria has held business interests in the US, admittedly, since 2015. When it comes to the cannabis industry in the US, despite the illegal nature of it on a federal level, the potential seems too great to be left behind.
On Monday shares of  Aphria saw a 1.88 percent decrease on the TSX. By market closure, the company’s stock traded at $5.73.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.