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Like any other cannabis producer based in the United States, Curaleaf Holdings Inc. operates illegally, but that did not stop the company from listing its shares on the Canadian stock market on Monday with a valuation of $ 4 billion.
The company's 28 jar stores and 12 production sites in 12 states all violate US federal law. That's why the company began trading Monday at the Canadian Securities Exchange – other major stock exchanges in Canada and the United States will not accept corporate listings overtly breaking the law.
Although Curaleaf violates US federal laws, the CST allows it and other US-based cannabis producers to list shares on the stock exchange. A listing at the CSE is not subject to as much scrutiny as the stock traded on the major US stock exchanges, on the Toronto Stock Exchange or on the TSX, which requires more of a stock price. information to be provided.
"Many US companies have solicited capital from CSE. This is the most logical place at this point. It is becoming the index of choice for US cannabis growers who "hit the factory," said Curaleaf CEO Joe Lusardi. MarketWatch said in a phone interview Monday. "We can not register in the US or the TSX at the moment, so it was the most logical place."
See also: What you need to know to invest in cannabis companies
"Touch the plant" is the jargon of the marijuana industry for companies that grow, distribute or sell real pot, and Curaleaf seems to do a lot of that. The company currently operates in states such as Florida, New York, and Oregon, where it grows grass, treats it, and sells potty at stores bearing the Curaleaf brand. At present, it operates in several states that have laws passed on cannabis for medical purposes and are trying to expand to states like California, where recreational marijuana use has been legalized. Currently, Curaleaf is able to produce 63,000 pounds of dried cannabis flower at its 12 facilities, according to documents filed with CSE.
In many ways, Curaleaf is similar to Canopy Growth Corp.
GSC -14.55%
one of the largest licensed cannabis producers in Canada: both companies seek to dominate private retail sales as much as possible and are vertically integrated. Other potential rivals such as Aurora Cannabis Inc.
CBA -16.05%
and Cronos Group Inc.
CRON, -12.60%
have taken a different approach to retailing their weeds.
Asked about the difficulty of operating an illegal business under US federal law, Lusardi said, "There is definitely a conflict between federal law and state law. In all our operations, we operate in full compliance with state laws. In every market we live on, cannabis does not cross state borders, we act according to the rules. It is a state operation by state.
Read: Doubtful Pot of Sale IGC Suspended its Listing and Delisting of Shares
Monday's listing was made through a reverse takeover where Curaleaf merged with Lead Ventures Inc. and also raised $ 400 million through a private placement. Curaleaf plans to spend some of this money on acquisitions. In a document filed with CSE, the company announced that it planned to proceed with acquisitions in Maryland, Massachusetts, Nevada, and Arizona for a total amount of approximately 83.5 million of dollars. It also plans to spend $ 80 million to expand its growing facilities.
"If you look at our offer today, we published a full prospectus that was comparable in quality to an IPO, although we have [reverse takeover], Says Lusardi. "We have been hugely divulged and enthusiastically received from the investment community. We took institutional money from more than 100 companies. We believe we have made a high quality offer and can create a lot of value. for CSE shareholders. "
GMP Securities analysts Robert Fagan wrote in a note to clients on Monday that he expected total potential sales of Curaleaf's existing facilities to rise to approximately $ 491 million. In the second quarter of the year, Curaleaf posted sales of $ 14.6 million and adjusted losses of $ 10.4 million. One of the keys to Curaleaf's success so far is that it grows all the cannabis sold in its various stores.
Do not miss: Canada lacks marijuana less than two weeks after legalization
In a note to customers on Monday, Fagan wrote that Curaleaf has "become a new industry leader" and is the largest public cannabis company in the United States.
Curaleaf sold shares at C $ 11.45 as part of its private placement. Shares began trading Monday at C $ 10 and closed the day down 27% to C $ 7.30, according to CSE data.
Monday marked another day of decline in the weed industry, due to shortages and supply difficulties in some of Canada's largest leisure markets. The ETFMG Alternative Harvest ETF
MJ -8.66%
fell 8.7% in common trades and Horizons Marijuana Life Sciences Exchange Traded Fund
HMMJ, -10.49%
fell 11%. The S & P 500 benchmark
SPX, -0.66%
fell 0.7% on Monday.
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