Leading Canadian cannabis companies are on the move below the border. With the promise of more investors, these companies are migrating their shares to the US as a way of attracting more established capital.
Canada’s decision to legalize the recreational use of cannabis has allowed the rise of an emerging investment market. The cannabis public sector has become one of the most followed industries for investors.
As such, the Investing News Network brings investors a collection of stories on the critical transition and its impact on the public markets.
Canadian cannabis companies are on the move and, as the market continues its maturation thanks to adult-use legalization in the country on October 17, these industry leaders are seeking US investors directly.
Following a securities filing with the US Securities and Exchange Commission (SEC) on Friday (October 5), Canadian licensed producer (LP) Aurora Cannabis (TSX:ACB) is pursuing a listing on the New York Stock Exchange (NYSE). On Tuesday (October 9), the producer confirmed its intentions.
The LP had previously confirmed its intentions to obtain a premier US listing for its shares as part of its Q4 update to shareholders in September.
“This listing provides access to a broader investor audience who gain the opportunity to participate in our continued success,” Aurora CEO Terry Booth said in a press release.
Although the listing is not final, this has been the best indication of where Aurora would list in the US since it made the announcement.
Cannabis companies have been looking to move shares below the border for a long time. Cronos Group (NASDAQ:CRON,TSX:CRON) was the first company to successfully list its shares in a premier US exchange.
“We believe this will increase long-term shareholder value by improving awareness, liquidity, and appeal to institutional investors,” Mike Gorenstein CEO of Cronos said at the time of the company’s announcement.
The company began offering its shares on the NASDAQ in February of this year.
Shortly after Cronos listed on the NASDAQ, Canopy Growth (NYSE:CGC;TSX:WEED) confirmed its intentions to uplist its shares to the US as well. Canopy shares began trading on the NYSE in May 24.
Since launching below the border, shares of Cronos and Canopy on the NASDAQ and NYSE have increased in value 28.22 and 68.40 percent respectively.
Canadian companies reaching US investors had been done so before through listings on the OTC Markets, which consists of three exchanges. These exchanges are viewed as a more smaller scale, riskier options for investors.
American institutional investors and more established investing franchises tend to avoid the smaller stocks found in the OTC in favour of listings on the NYSE and NASDAQ .
Both Aurora and Aphria (TSX:APH) hold OTC listings under the ticker symbols ACBFF and APHQF.
Tilray makes US public debut
One of the most famous US stocks in the cannabis space has been Tilray (NASDAQ:TLRY). Unlike its competitors, the company didn’t uplist from a Canadian exchange but instead went directly to the US market.
Tilray launched its initial public offering (IPO) and made its public debut, after years of private operations, in July.
Tilray’s path on the NASDAQ came into the spotlight after the stock unleashed an unparalleled rush for these producers.
Alan Brochstein, cannabis analyst with 420 Investor, said he viewed the Tilray rush as a perfect storm built on the exact method of the company’s IPO.
The analyst later wrote he viewed the company’s spike as a “big positive” for the cannabis market, alongside the gains from Canopy and Cronos in the US exchanges.
At one point of Tilray’s blitz, which started in August, the company’s shares reached a price of over US$300, accompanied by a market capitalization of over US$10 billion.
As such, cannabis LPs with a leading presence on the Toronto Stock Exchange (TSX) are looking for these premier exchanges to expand the range of shareholders and their presence in the sector.
In a move to clear the company’s path to the coveted listing, Aphria sold its remaining stake in cannabis US multi-state operator Liberty Health Sciences (CSE:LHS). The producer retains a right to buy back its stake for up to a five year period.
Fellow TSX-listed LP CannTrust Holdings (TSX:TRST) has also confirmed possibilities of securing a US listing. Departing CEO Eric Paul told The Globe and Mail the company wasn’t ready to confirm anything.
“It’s a consideration, but we don’t have a definitive plan for it. No decision has been made to list,” he said in September.
It’s unclear whether new management will pursue the US listing more aggressively.
While facing pressure from a large shareholder HEXO (TSX:HEXO) CEO Sébastien St-Louis announced the company was also pursuing a US exchange listing and would reveal more “in the near future.”
As these companies gain the attention of US investors, legitimacy and a broader shareholder base is entering the cannabis sector.
“The broader universe of traders in the US, many who have no interest in trading OTC stocks or even TSX-listed or [Canadian Securities Exchange] CSE-listed names, is finally paying attention to the cannabis sector,” Brochstein wrote in a weekly update to investors.
It will be critical for shareholder to see how strong the reaction to the new US listings will have for Aurora and other upcoming companies and how strongly the case can be made for more cannabis companies to share in the US as well.
Don’t forget to follow us @INN_Cannabis for real-time news updates!
Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.