A handful of Canadian marijuana companies are already knee-deep in California, deploying tens of millions of dollars in cultivation amenities, shops and branded merchandise to set up a footprint on the earth’s largest marijuana market.
Executives on the companies – whose shares commerce on the Canadian Securities Exchange (CSE) – stated they hope to capitalize on:
- Access to Canada’s deep capital market.
- Rules that maintain bigger rivals listed on the Toronto Stock Exchange and the TSX Venture Exchange from doing enterprise within the U.S. hashish business.
- Their personal expertise in doing enterprise in a tightly regulated market resembling Canada’s.
CannaRoyalty is amongst these with an aggressive California technique. Almost all of the Ottawa firm’s new capital is earmarked for the Golden State.
“California is the market. You get it right there, you have the key to all other markets,” stated Marc Lustig, CEO of CannaRoyalty, which invests in Canada and U.S.-based hashish companies.
CannaRoyalty (CSE: CRZ) has eight belongings there involving distribution, manufacturing and branded merchandise.
Leith Pedersen, president and co-founder of Sunniva (CSE: SNN) – a vertically built-in medical marijuana firm based mostly in British Columbia – is also bullish on California.
“Our interest in California stems from the fact that it is the largest cannabis market in the world – larger than Colorado, Washington and Oregon combined,” he stated.
His medical-focused firm is constructing a 325,000-square-foot manufacturing facility in Cathedral City, in Southern California. When accomplished, it’ll have an annual capability of 60,000 kilograms of dried flower.
Access to capital
Hadley Ford, the CEO of iAnthus Capital Holdings, predicts California would be the epicenter of innovation and progress within the marijuana business.
He’s leveraging his firm’s entry to Canada’s capital markets to give it a leg up over U.S. rivals, which don’t have as huge a funding pool to tap.
“Our ability to access capital and use our stock to make acquisitions gives us a competitive advantage,” stated Ford, whose New York-based marijuana funding and operations firm trades on the CSE as IAN.
iAnthus is one in every of quite a lot of American companies utilizing holding companies in Canada to tap the capital markets.
It has raised 57.2 million Canadian dollars ($45.6 million) in three transactions involving share choices and personal placements, however firm executives haven’t but spelled out how a lot could possibly be utilized in California.
Ford stated he’s nonetheless weighing alternatives there and intends to make a transfer, probably involving retail, later this yr.
Since going public, CannaRoyalty has raised CA$37 million in fairness and debt, funneling about half of that into its California technique.
Sunniva, which went public final week, is deploying CA$63 million in California to construct its manufacturing facility in Cathedral City.
Toronto-headquartered Nutritional High International (CSE: EAT) – a maker of infused merchandise – just lately struck a deal to increase CA$10 million.
The firm plans to use an undisclosed quantity of that complete to present funding to TKO Products, a California edibles maker.
Nutritional High – which additionally has the choice to purchase a stake in TKO – stated the funding will permit the corporate to full its new manufacturing facility close to Los Angeles.
The CSE benefit
Ironically, U.S. prohibitions blocking the event of the hashish business on a nationwide scale are shielding the nation’s business from competing towards well-capitalized Canadian friends that commerce on the Toronto Stock Exchange and the Venture Exchange.
That means Canada’s hashish behemoths, some sporting market caps north of CA$6 billion, gained’t be competing in California anytime quickly.
That provides companies traded on the CSE – which permits listed companies to do enterprise within the United States offered they meet sure danger disclosure necessities – a definite benefit, at the least for now.
Last week, an umbrella group for Canada’s securities regulators stated it might assessment these tips in mild of Attorney General Jeff Sessions’ determination to revoke Obama-era protections for state-legal MJ companies.
Marapharm (CSE: MDM), a marijuana funding firm based mostly in British Columbia, is also amongst these utilizing the CSE to be lively in California. It just lately purchased a privately owned medical hashish dispensary for $1.6 million (CA$2 million), including to its belongings within the Golden State.
Meanwhile, Phivida Holdings (CSE: VIDA) of Vancouver, British Columbia, has a distribution and formulation settlement to present pharmaceutical-grade cannabidiol within the state. Phivida markets CBD merchandise.
CannaRoyalty ‘all-in’ on Golden State
CannaRoyalty’s California enlargement technique has three elements: distribution, manufacturing and branded merchandise.
“We will continue to be razor focused on transactions that give us manufacturing, distribution and branded products in California,” Lustig stated.
Distribution was the impetus for CannaRoyalty’s CA$5 million funding in River, a California marijuana distributor that sells merchandise to 800 dispensaries, Lustig stated.
The deal gave CannaRoyalty an undisclosed reduce of River’s revenues.
Moreover, it got here with a “preferred” distribution settlement for CannaRoyalty’s personal branded merchandise: Green Rocks Botanicals, a cartridge line, and Soul Sugar Kitchen, an edibles line.
The funding in River, plus CannaRoyalty’s deliberate acquisition of Alta Supply, will increase its entry to over 1,000 of California’s roughly 1,200 dispensaries.
“California will make Canada look like just another regular state, little different than Colorado or Nevada,” Lustig predicted. “California will always be the biggest legal cannabis market in the world.”
Matt Lamers may be reached at [email protected]
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