Quebec’s new drug dealers
Who owns SQDC’s cannabis suppliers? Here’s who’s profiting from legal pot
As lineups continue outside Société québécoise du cannabis stores, who stands to profit from Quebecers’ apparently insatiable demand for pot?
While the SQDC itself is a crown corporation, its six suppliers are all private companies.
Five of the six are publicly traded, which means that in most cases their ownership is spread out among stock market investors. The only SQDC supplier that isn’t a listed on a stock market, Med-Releaf, is a wholly owned subsidiary of another supplier, Aurora Cannabis.
Publicly traded companies are required to disclose the names of insiders — a category that includes both their senior managers and people who hold more than 10 per cent of the shares in the company. Here’s who is profiting the most from cannabis legalization in Quebec, according to filings with securities regulators:
Aphria: Based in Leamington, Ont., Aphria has a three-year deal to sell 12,000 kg of cannabis a year to the SQDC. But consumers won’t see Aphria’s name on the package. Instead it sells cannabis in Quebec under the brand names Riff and Solei.
Its largest individual shareholders are its founders, John Cervini and Cole Cacciavillani. Both have a background in family-owned greenhouse farming businesses. Cacciavillani’s shares in the company are currently worth more than $75 million, while Cervini’s are worth more than $133 million, when shares he holds indirectly through another company are included.
Calhoun First Financial Inc., a company legally headquartered in Florida but with a mailing address in Toronto, also holds more than 10 per cent of the shares in Aphria. The company ’s only director is Wally Rudensky, a partner at accounting firm MNP.
Aurora Cannabis: Based in Edmonton, Aurora has an deal to sell the SQDC 5,000 kg of cannabis this year.
While no single individual or company holds more than 10 per cent of its shares, its president, Stephen Dobler, holds shares in the company worth more than $140 million through another company of which he is the sole shareholder. The company ’s CEO, Terry Booth, holds shares in Aurora worth more than $97.5 million through another company that he owns.
In July, Aurora completed the acquisition of MedReleaf, which has a deal to sell the SQDC 8,000 kg of cannabis this year. The all-stock deal was valued at $2.5 billion.
MedReleaf sells cannabis in Quebec under its own name as well as under the brands AltaVie and San Rafael ’71.
Hexo Corp.: Based in Gatineau, Hexo is the only Quebec-headquartered cannabis company that sells to the SQDC. Formerly known as Hydropothecary, it’s the SQDC’s biggest supplier, with a deal to sell the crown corporation 20,000 kg of cannabis this year.
No individual or company holds more than 10 per cent of its stock.
The insider with the largest holdings is Vincent Chiara, the president of Montreal-based commercial real estate firm Groupe Mach. Including shares he owns or controls through another company, Casale HC Limited Partnership, his holdings are worth more than $37 million.
Canopy Growth: Based in Smiths Falls, Ont., about halfway between Ottawa and Kingston, Canopy has an agreement to supply the SQDC with 12,000 kg of cannabis this year. It’s also one of the two largest cannabis producers by market capitalization.
Canopy Growth sells cannabis in Quebec under the brand names Plain Packaging and Tweed.
As of Nov. 1, alcohol company Constellation Brands, the maker of Corona beer and Kim Crawford wine, owns 37 per cent of Canopy Growth.
The deal, first announced in August, was valued at around $5 billion and took several months to be approved by regulators and Canopy shareholders.
Constellation was already a major shareholder in Canopy and had invested several hundred million dollars in the pot company.
No other company or individual owns more than 10 per cent of Canopy Growth. Among insiders, CEO Bruce Linton’s holdings in the company are worth around $108 million, while Toronto real estate developer Murray Goldman, who sits on Canopy ’s board, holds more than 3.9 million shares — mostly through companies he owns or controls — worth more than $190 million.
Tilray: Based in Nanaimo B.C., Tilray has a deal to sell 5,000 kg of cannabis to the SQDC this year and is now the largest cannabis producer in the world by market capitalization.
It sells recreational cannabis through a subsidiary, High Park Holdings, under the brand names Dubon, which is aimed at the Quebec market; Grail, a “luxury brand”; and Irisa, a “women’s wellness brand.”
Tilray was the first Canadian cannabis company to list on a U.S. stock exchange. It went public on the NASDAQ in June.
But while it’s publicly traded, Tilray is a controlled company as the majority of its shares remain in the hands of Privateer Holdings Inc., private equity firm that was its sole owner before its initial public offering. Only nine million shares were made available to retail investors in the IPO. Privateer continues to hold 75 million shares, while 10 hedge funds that invested in the company own an additional 7.6 million shares.
Seattle-based Privateer was founded by three billionaire businessmen: Brendan Kennedy, who is also Tilray ’s CEO; Michael Blue; and Christian Groh.
Before taking Tilray public, Privateer raised US$200 million. Among its backers was Founders Fund, a venture capital firm cofounded by Peter Thiel.