Mar­i­juana SPAC eyes $125-mil­lion in Neo list­ing

The Globe and Mail Metro (Ontario Edition) - - Report On Business - CHRISTINA PEL­LE­GRINI

An in­vest­ment ve­hi­cle devoted to the bud­ding le­gal cannabis sec­tor is seek­ing to go pub­lic in Canada on the Ae­quitas Neo Ex­change Inc.

Cannabis Strate­gies Ac­qui­si­tion

Corp. is a spe­cial-pur­pose ac­qui­si­tion com­pany, or SPAC. A SPAC is a com­pany that raises money in the pub­lic mar­kets in or­der to ac­quire other busi­nesses within a cer­tain pe­riod of time. It won’t have com­mer­cial op­er­a­tions or as­sets other than cash un­til such a deal is done.

The SPAC is look­ing to raise $125-mil­lion to buy one or more pri­vate mar­i­juana com­pa­nies that are val­ued be­tween $150-mil­lion and $300-mil­lion, ac­cord­ing to reg­u­la­tory fil­ings made pub­lic late Mon­day.

The com­pany is open to in­vest­ing in cannabis pro­duc­ers or dis­trib­u­tors in sev­eral coun­tries, in­clud­ing in Canada and the United States, where the drug is le­gal in cer­tain states, but il­le­gal un­der fed­eral law.

Last month, the Toronto Stock Ex­change said that any is­suer that is op­er­at­ing in vi­o­la­tion of fed­eral drug laws in the United States is breach­ing its list­ings poli­cies. For this rea­son, Cannabis Strate­gies Ac­qui­si­tion is list­ing its shares on the Neo, which has no prob­lem list­ing these stocks.

The Neo is a rel­a­tively new and lit­tle-known Cana­dian stock ex­change backed by a group of fi­nan­cial in­sti­tu­tions, in­clud­ing Royal Bank of Canada. To date, its list­ings in­clude a small ros­ter of ex­change-traded funds.

The SPAC is be­ing taken pub­lic by Mercer Park L.P., which is a pri­vate-in­vest­ment firm in New York con­trolled by Jonathan San­del­man. The com­pany will rely heav­ily on the ex­per­tise of its chief op­er­at­ing of­fi­cer, Mark Smith, a mar­i­juana op­er­a­tor in Colorado and Ne­vada.

Cannabis Strate­gies Ac­qui­si­tion has to do a deal within 18 months, or re­turn its cap­i­tal to in­vestors. Un­der the rules of the SPAC, share­hold­ers get to vote for or against any planned trans­ac­tion.

Even as re­stric­tions on the drug are eased in sev­eral coun­tries, the hazy le­gal land­scape has made it dif­fi­cult for mar­i­juana com­pa­nies to get ac­cess to cap­i­tal to fund their busi­ness.

Canac­cord Ge­nu­ity Corp. is the sole un­der­writer on the of­fer­ing.

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