Marijuana ‘Haze’ Covers Canada, TMX Debating US Policy
Canada’s stock market has been focused on the Cannabis industry opening up, but the country’s largest stock exchange is grappling with how to deal with Cannabis related companies that have investments in the US, where marijuana is banned by federal law.
There could be more certainty soon, there is none yet.
TMX Group Ltd., the parent company for bourses Toronto Stock Exchange and TSX Venture Exchange, has held several with listed company managers and probably very close to making a policy announcement.
TMX is in a predicament because many of the Canadian producers that investors have fallen in love with are increasing their US footprint or are making plans to do so.
But, the exchange mandates that all listed companies are expected to comply with relevant laws and regulations in the jurisdictions in which they operate.
We can expect that a new policy for Cannabis producers is in the works, though there is noting official yet.
Recreational Cannabis is expected to become legal in Canada by this time next year, and there’s been an explosion in companies cultivating the plant.
At least 10 marijuana companies have new listings this year on the TSX, TSX Venture and rival Canadian Securities Exchange, and some 51 enterprises have gotten the Green Light to grow Cannabis.
The industry is eyeing the US as a potential strong market.
Marijuana has fallen into a gray area in the US, where 8 states have legalized medical and recreational marijuana, including Colorado and Nevada.
The drug is outlawed nationally by the federal government.
No major moves have come against states that have legalized, but many in The Trump Administration, US Attorney General Jeff Sessions in particular, are not friends of the Cannabis industry.
Major US exchanges, such as the NASDAQ will not accept listings for Cannabis companies, and banks and other lenders are wary of the industry.
Canada’s TMX appears to be taking a case-by-case approach to how it handles companies with US interests, many producers have faced some push back.
TMX has not yet explained its strategy and is depriving investors of a diversity of marijuana companies to choose from.
Ensuring compliance with TMX’s published rules and policies across our broad issuer base is an integral, ongoing function we perform and each issuer is handled on a fact-specific basis.
In the meantime, the Canadian Securities Exchange has become a haven for tiny, unlicensed Canadian companies as well as US-based corporations barred from selling shares in their domestic markets.
TMX has deep concerns about listing companies with US exposure and is reviewing eligibility for listing, said Canadian Securities Exchange CEO Richard Carleton.
Canadian marijuana companies with US investments make extensive disclosures on their operations and any move to restrict or prevent companies from listing will be a disappointment to investors, he said.
Officials with Canadian Securities Administrators, an umbrella organization for provincial and territorial regulators, are currently discussing these issues with the exchanges, an Ontario Securities Commission spokeswoman said in an e-Mail response to our query.
Some Canadian companies will stay out of the US than take the legality risks associated with the market.
Institutional investors should be able to feel confident that funds from Canadian marijuana operations are not going toward illegal activities, and disclosing US operations in a Prospectus is not a sufficient way to explain away breaking a law.
A new TMX policy would give licensed producers clarity on how to proceed for the number of of companies that are considering expansion in the US or embarking on deals with brands that produce infused products in states such as Colorado and Washington.
In TMX’s review, the company is examining companies that are directly investing in US marijuana production and those that have more passive investments, such as marketing agreements.
Company managers are hoping that when the new TMX policy comes down it is not punitive to thier stakeholders.
My take err on the side of prudence, be very cautious, it is your money and so, your responsibility.
Have a terrific weekend.