A Canadian marijuana company will become the first “pure play” cannabis listing on a major U.S. stock market, an important milestone for the cannabis industry.
Cronos Group, one of Canada’s largest vertically integrated medical marijuana companies, will start trading Tuesday on the Nasdaq Global Market under the symbol CRON. Cronos will maintain its listing on Toronto’s TSX Venture Exchange.
The Nasdaq, which hasn’t been shy about rejecting cannabis companies, doesn’t list any other plant-touching company directly involved in cultivation and sales.
The move by Cronos, based in Stayner, Ontario, could light a flame for movers of institutional capital in the United States who haven’t embraced the MMJ industry to the extent that large investors in Canada have, according to analysts.
“It could loosen some pockets of U.S. institutional money.”
The Nasdaq listing also gives U.S. investors easier access to international medical cannabis opportunities through Cronos’ operations in key burgeoning markets in Europe.
“This is good for exposure. It’s not that easy for U.S. investors to get access to international cannabis stocks,” Ajamian said.
‘Stigma eroding’
Any headwinds the medical cannabis industry faces from the Trump administration are being offset by growing acceptance of the sector across a broader range of American society.
And the country’s first “pure play” cannabis listing on a major stock exchange is expected to add to that momentum.
“It shows the stigma is eroding,” said Mike Gorenstein, president and CEO of Cronos.
“The more you have mainstream institutions like Nasdaq underwriting and accepting cannabis as a real industry, the better it is for all of us.”
He said being listed on the same exchange as Apple, Google and Facebook “adds a layer of legitimacy” to the entire medical cannabis sector.
Samantha Roman, consultant and founder of Toronto-based Credible Cannabis, said a major U.S. stock market’s acceptance of a vertically integrated cannabis company is a testament to the level of credibility the industry and Cronos have established.
“These highly regulated bodies do not make their decisions lightly,” she said.
“The fact that they have been able to achieve this really does speak to their track record and dealing appropriately with regulators.”
More to follow?
It could be the start of more cannabis corporations seeking listings on top U.S. stock markets, analysts say.
Jason Zandberg, analyst at PI Financial in Vancouver, British Columbia, said Cronos’ move makes it more likely for some high-end vertically integrated medical cannabis companies to make the jump to a top American exchange.
“It’s a high hurdle, so not every cannabis company will be able to get a Nasdaq listing,” he said.
“But I think some of the higher-quality names are likely to make the same transition.”
Zandberg said a company like British Columbia-based Tilray could be a candidate, given that its parent company is U.S.-based Privateer Holdings.
He noted, however, he doesn’t have any knowledge of a Tilray plan to go public.
US strategy
Cronos will do business only in markets where medical cannabis is legal at a federal level, so its Nasdaq listing doesn’t portend imminent expansion into any U.S. state.
But the listing does set the stage if things were to change in Washington DC.
“When it comes to U.S. market entry, the regulatory landscape can change a lot, and we feel it is heading in the right direction,” said Gorenstein. “We’ll be opportunistic and aggressive.
“Whether that’s through acquisitions, partnerships or just a straight-line extension of our own business model, we do think this will give us more awareness, more exposure, and make that transition a success.”
The U.S. listing is also expected to make mergers and acquisitions easier to negotiate, because the heavier a stock is traded, the more it becomes like cash.
Cronos ultimately believes listing on the Nasdaq gives it more awareness and exposure, which is highly important in a young industry that’s restricted in advertising.
“We want to give more American investors a chance to get involved with Cronos in these early stages,” Gorenstein said.
“Having a strong base will be a big positive when we do ultimately enter (the U.S.).”
Matt Lamers can be reached at [email protected]
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