Canada : If 2018 was the year of Canadian cannabis, 2019 will be America’s time in the marijuana spotlight.
Since Canada legalized recreational pot in October, investor interest has been rapidly shifting south of the border on the expectation that it won’t be long before the U.S. follows suit. Currently, recreational marijuana is legal in 10 states, plus Washington D.C., but remains banned at the federal level.
“Investors’ imagination is being captured more by what’s possible in the U.S.,” said Alfred Avanessy, managing director of investment banking at Cormark Securities Inc., which counts cannabis as its biggest source of business in Canada. “The U.S. is a couple years behind us from a regulatory perspective and it’s also by definition 10 times larger than we are.”
U.S. consumer spending on legal cannabis is expected to reach $20.9 billion (U.S.) by 2021 compared with $4.5 billion in Canada, according to a June report from Arcview Market Research and BDS Analytics.
That’s already being reflected in the financing data from the Canadian Securities Exchange, the only stock exchange in either country that will list cannabis companies with U.S. operations.
In the first 10 months of the year, U.S.-based cannabis issuers raised $1.5 billion ($1.1 billion U.S.) on the CSE, or about 60 per cent of the total raised by all pot firms, according to data provided by the exchange. By comparison, there was one U.S. cannabis listing on the CSE in all of 2017 which raised $145,000.
The trend has only accelerated since October, with notable listings from Acreage Holdings Inc., Harvest Health & Recreation Inc., MJardin Group Inc. and Cresco Labs Inc. — and more to come.
“We have applications in hand from a number of significantly sized U.S. issuers and we’ve been talking to a number of folks who don’t have applications in yet but it seems a certainty that they will be showing up on our doorstep at some point in the first or second quarter of next year,” said Richard Carleton, chief executive officer of the CSE.
The U.S. issuers are also providing a more compelling story to investors, coming to market with “a significant operating history, revenue in place and a significantly higher degree of maturity than we saw from the Canadian producers back in the day,” Carleton said.