Pot firms cross borders to raise money in battle for dominance

Cronos CEO Mike Gorenstein said while there are more stringent rules to follow on the Nasdaq, and it won’t be able to get a physical foothold in the U.S. before it is federally legal, the strategy is still advantageous.

“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.,” he said in an interview.

The flurry of activity comes as Washington’s political tone seems to have softened toward the drug.

The Trump administration was initially hostile to an Obama-era memorandum that suggested the U.S. federal government would not intervene in states where the drug is legal.

That prompted TMX Group, Canada’s biggest exchange operator, to warn issuers with ongoing cross-border activities that they are not in compliance with its requirements and could face delisting.

The TMX Group’s stance helped to cement the CSE’s position as the go-to exchange for cannabis companies, allowing issuers to have U.S. exposure, provided they disclose to investors the inherent risks.

The Trump administration has recently cooled its rhetoric on marijuana enforcement.

Senator Cory Gardner from Colorado, one of the first states to legalize the drug for recreational use said earlier this month he received a commitment from Trump that his administration’s stance would not impact Colorado’s legal marijuana industry, and that the president would support congressional efforts to protect states that have legalized the drug.

This shift in tone is “tremendously positive for the U.S. cannabis sector,” said Vahan Ajamian, an analyst with Beacon Securities.

“While we will have to wait to see legislation actually pass, in our view, this turn of events could take the sector to a much more secure state than during the Cole Memo,” he said in a recent note to clients.

Other American politicians are also warming up to cannabis, with former Republican Speaker of the House John Boehner joining the advisory board of a marijuana company and New York governor Andrew Cuomo preparing to legalize the drug in his state. On Friday, Senate Minority Leader Chuck Schumer said he plans to introduce new legislation in the U.S. senate to do so.

These developments help de-risk the industry and “U.S. cannabis operators represent the next wave of outsized returns,” Ajamian added.

The increasing potential for legal cannabis in the U.S. has some Canadian pot companies jumping through hoops to meet exchange requirements north of the border while ensuring one foot in the market south of the border — to the benefit of Canada’s alternative exchanges.

Last Tuesday, pre-license cannabis producer Maple Leaf Green World got final approval to migrate its listing from the TSX Venture exchange to the alternative NEO exchange.

Maple Leaf chief executive Raymond Lai said it voluntarily delisted its shares and called the TMX Group’s stance on cannabis “short sighted.”

“We feel that the U.S. market is so huge… We are really frustrated with the TSX position on marijuana companies and business with the U.S.,” he said.

TMX group spokesman Shane Quinn said the exchange operator is aware that legislation in the hot new sector “continues to evolve.”

“While we continue to monitor legal developments affecting this sector, marijuana remains a Schedule I drug under the U.S. federal Controlled Substances Act. From our perspective, United States federal law has jurisdiction over state law in this matter.”

Meanwhile, Jos Schmitt, the chief executive of Aequitas NEO, said he expects at least two more new cannabis-related listings on their upstart exchange.

“When we have here in Canada the opportunity to cater to a business that is going to grow and that is going to be beneficial to our economy, well, we’re going to be supporters and favourable to that, within the regulatory framework.”

By Armina Ligaya, The Canadian Press

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