Aphria Inc., one of the big five Canadian producers, will join its colleagues Canopy Growth Corp. and Aurora Cannabis Inc. on the New York Stock Exchange, effective Friday. You can look for the symbol APHA and, for Aurora – which started its listing on the NYSE less than one week ago – search for ACB.
This migration by the biggest of Canada’s cannabis producers to these big exchanges started in May, when Cronos Group listed on the Nasdaq. This shattered a glass ceiling for pure-play cannabis companies. These types of companies were not available on the largest exchanges prior to that. Tilray Inc. listed on Nasdaq months later.
Over time, I expect more cannabis companies to “uplist” onto the world’s most famous stock exchanges, too.
The largest companies move to exchanges like the NYSE and Nasdaq because, quite simply, they can. It also just makes sense for these larger-type companies. After all, these are the most prestigious, most liquid exchanges on which to trade one’s stock. Institutional investors that can really move the needle are drawn to this.
But it’s not the right fit for every company. And you’re not likely to see the largest success stories of late 2018 or 2019 there…
There’s a Better Exchange Up-And-Comers
Many companies, even several operating only in legalized U.S. states, cannot trade on the NYSE or Nasdaq. No company that “touches the leaf” on U.S. soil can list there because of current federal-level prohibition.
To list on a recognized U.S. exchange, a company has to complete certifications under Sarbanes-Oxley and other laws. The company’s executives have to swear, under penalty of perjury, that they are not aware of the company doing anything illegal. Until the inevitable rescheduling or descheduling of cannabis – which even former U.S. House Speaker John Boehner confidently predicted during the American Cannabis Summit is fewer than five years away – every American cannabis company is breaking federal law.
The Toronto Stock Exchange has similar requirements regarding being in compliance with the law in all of the jurisdictions in which it operates.
And that’s not a problem because of this year’s rise of the Canadian Securities Exchange (CSE).
The CSE, which saw an opportunity and created a home for U.S. cannabis companies, is more liquid and more regulated than the U.S. over-the-counter market, where such cannabis companies previously had to trade.
Since big institutional investors benefit most from the liquidity, a CSE listing is a smart place for U.S. cannabis stocks to list while they build their businesses. And that’s the time when you most want to invest in these companies, before they pop and become widely known names like Canopy, Aurora, Tilray, and Aphria.
CSE listings, like two of my initial recommendations to members of the National Institute for Cannabis Investors’ Cannabis Investor’s Report service, haven’t been a barrier to the companies’ ability to raise money. There is currently a flood of listings on the CSE that is growing by the week.
So, as long as we have small, up-and-coming companies and small investors, the CSE is a great place to trade. Rising business fundamentals are better for a stock’s price than increased liquidity will ever be.
As for the few Canadian companies big enough to list on the NYSE or Nasdaq, they’re paving the way for smaller companies to do so in the future. That will take government action in the United States – but, again, that’s coming sooner than anyone would have expected even just a year ago.
I’ll be back in our next news post to talk about what it means (and what you should do) when markets face downturns.
Thanks for being an important part of the National Institute for Cannabis Investors,
Executive Director, the National Institute for Cannabis Investors
P.S.: If you haven’t already, you owe it to yourself to watch the American Cannabis Summit, featuring former U.S. House Speaker John Boehner. Find out why he is “all-in” on cannabis now, why he believes so much in the industry’s growth opportunity, and why it will be federally legalized in less than five year. Click here to watch an encore presentation of this historic event.
November 01 2018