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Marijuana MSOs uplist shares in Canada with eye on US exchanges


As several cannabis multistate operators upgrade their Canadian stock listings to higher-tier exchanges, more are expected to join the trend – but their ultimate goal appears to be listing on U.S. exchanges such as the Nasdaq.

Those Canadian equity uplistings, in which MSOs move from the more junior Canadian Securities Exchange (CSE) to the Toronto Stock Exchange (TSX) or the Cboe Canada exchange, bring potential advantages, including:

  • Higher trading volume and increased liquidity.
  • Removing barriers to attracting institutional investment.
  • Meeting stricter listing requirements, bringing those companies closer to the prerequisites for ultimately listing on the Nasdaq or New York Stock Exchange.

Those more rigorous listing requirements “should provide added investor confidence,” said Matt Karnes, founder of New York-based cannabis investment research firm GreenWave Advisors.

The uplistings are also part of a broader goal of eventually listing on major U.S. exchanges when federal policy reform – such as legalization – permits such a move by plant-touching companies, Karnes said.

“This is the first step so (that) when the floodgates open, if they’re better positioned, it will make that transition easier.”

“Rather than going from CSE directly to the Nasdaq or the New York Stock Exchange, by going this one step up, they’re (more closely) aligned to what the requirements would be under a stricter exchange listing in the U.S.”

Uplisting advantages

So far, the group of MSOs uplisting in Canada includes:

  • Toronto-based TerrAscend, which led the pack when it moved from the CSE to Canada’s premier exchange, the TSX, in July. The company has vertically integrated operations in the U.S. and retail outlets in Canada.
  • Chicago-headquartered Verano Holdings, which moved from the CSE to the Cboe Canada exchange this month.
  • New York-based Curaleaf Holdings, which is in the process of moving from the CSE to the TSX.

Meanwhile, The Cannabist Co. – previously known as Columbia Care – has delisted from the CSE while maintaining its listing on the Cboe Canada.

The New York-based operator listed on the NEO Exchange in 2019 and added its CSE listing in 2020.

The NEO Exchange was renamed Cboe Canada this year after being acquired by Chicago-based Cboe Global Markets in 2022.

Cboe Global Markets is also the parent company of the Cboe Options Exchange, which describes itself as the largest options exchange in the United States.

For TerrAscend, moving from the CSE to a larger exchange such as the TSX brought access to a larger group of potential investors, Executive Chair Jason Wild told MJBizDaily.

Listing on an exchange with more participants meant “we’d be reaching a larger audience of potential investors, and we wouldn’t be like the tree that fell in the woods that nobody knew about, because they weren’t listening,” he said.

Wild added that the volume of trading in TerrAscend shares has increased significantly since the company started trading on the TSX in July, even before potential rescheduling news in late August heralded a frenzy of marijuana investment.

He said the uplisting has solved another problem for TerrAscend: Institutional investors such as hedge funds are now able to invest in the company whereas, before, those investors’ prime brokers wouldn’t take custody of plant-touching U.S. cannabis stocks.

“We’ve heard specific names of multiple brokerage firms that have removed us from their block list because we moved to the Toronto Stock Exchange,” Wild said.

“And we have not heard of any firms that are blocking it anymore. ”

Moving on up

Verano is the second MSO to make the move from the CSE, listing on the Cboe Canada exchange on Oct. 18.

President Darren Weiss said the CSE has Verano’s gratitude for “taking a chance on U.S. cannabis when other folks wouldn’t.”

“I don’t mean to denigrate (the CSE); they’ve been a major – a major, major – catalyst to the development of publicly traded U.S. cannabis,” he told MJBizDaily.

But listing on a more senior exchange offers a key advantage, Weiss said: “The speed at which we could, upon a federal (marijuana-policy) catalyst, have an opportunity to access U.S. equity markets.”

“I think the concept of Cboe Canada is still nascent,” said Frederico Gomes, a cannabis equity analyst with Calgary, Alberta-based ATB Capital Markets.

“It’s not in the same league as the TSX or the Nasdaq, or the NYSE.”

(Verano said its October debut on Cboe Canada made it the exchange’s largest corporate issuer.)

Still, Gomes considers Cboe Canada to be a higher-tier exchange than the CSE, with a “broader platform.”

U.S. plant-touching marijuana companies typically can’t list on major U.S. exchanges such as the NYSE or the Nasdaq because of the federal illegality of marijuana. (One U.S. cannabis producer, Florida-based Bright Green Corp., is Nasdaq-listed, but it has a federal government license.)

The TSX has a similar prohibition, although a workaround is available via creative corporate restructuring, as shown by Canopy Growth Corp.’s October 2022 creation of Canopy USA, a holding company for its U.S. cannabis investments.

“I think the conversation started when Canopy (Growth) announced the Canopy USA structure. … That’s when it started, and the TSX obviously accepted that structure,” Gomes said.

TerrAscend engaged in that kind of restructuring to achieve its TSX listing, although Wild noted that the company, which already had Canadian operations and received previous investment from U.S.- and Canada-listed Canopy, “already largely had the structure in place that was required for the TSX listing.”

In contrast, cannabis companies such as Verano that list on Cboe Canada “don’t have to do any of the restructuring that TerrAscend did to ring-fence the (plant-touching U.S.) assets,” ATB analyst Gomes said.

Verano’s Weiss said the MSO considered listing on the TSX before choosing Cboe Canada.

“They were adamant that we would not have to do any restructuring of our business to take advantage, we would just have to meet their requirements,” he said.

U.S. exchanges in sight

Weiss said Verano also “got commitments from Cboe Canada that, as soon as there was an avenue, that the gates would open on the Cboe U.S. side and give us immediate access, without having to do anything, to a true U.S. exchange with significant market share.”

“And then we can stay on Cboe U.S. if we wanted, or we can move to a NYSE or a Nasdaq,” he said.

TerrAscend’s Wild said the company would “like to be dual-listed, both on the Toronto Stock Exchange and on a U.S. exchange, when that becomes allowable.”

Now that the company meets TSX listing standards, Wild said, TerrAscend is in a position to list on a U.S. stock exchange in “weeks, not months” if such a listing becomes possible.

In the meantime, other CSE-listed MSOs could follow suit and uplist their Canadian shares.

“I do not anticipate that a year from now there are going to be nearly as many, if any, U.S. THC cannabis companies on the CSE,” Verano’s Weiss said.

With U.S. cannabis heavyweight Curaleaf pursuing a TSX listing, ATB analyst Gomes noted, “if they see some impact on trading liquidity, I would expect that to push the other companies to pursue the same.”

GreenWave Advisors’ Karnes also expects to see more MSOs uplisting in Canada – unless, he said, the U.S. regulatory or legislative reform permits domestic stock listings by plant-touching marijuana companies.

“Then you skip ‘Go’ and you go right to where you want, right to the U.S. exchanges,” he added.

“But who knows if that’s going to come to fruition?”

Solomon Israel can be reached at solomon.israel@mjbizdaily.com.



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