TMX faces dilemma over legal marijuana
Pot commerce in grey area in United States where it is outlawed federally
Canada’s stock market has been ablaze with reefer madness, but the country’s largest exchange is grappling with how to deal with pot companies that have investments in the U.S., where marijuana is still banned by federal law.
There could be more certainty soon, according to Vic Neufeld, the chief executive officer of licensed producer Aphria Inc. TMX Group Ltd., the parent company for sister bourses Toronto Stock Exchange and TSX Venture Exchange, has held several conversations with Aphria and is probably “very close” to making a policy announcement, Neufeld said.
TMX is in a predicament because on the one hand many of the Canadian producers that investors have fallen in love with are increasing their U.S. footprint or are making plans to do so. But at the same time, the exchange mandates that all listed companies are expected to comply with relevant laws and regulations in the jurisdictions in which they operate, TMX spokeswoman Catherine Kee said. She declined to comment on whether a new policy for pot producers is in the works, adding that the company doesn’t comment on specific issuer matters.
“It’s a real delicate issue for them,” Aphria’s Neufeld said. The company is listed on the TSX and is making a $25 million investment in Florida as part of its U.S. expansion strategy. “They don’t want to get in the way of Canadian commerce, but they also understand in the U.S., federally, it’s a no-no.”
Recreational cannabis is expected to become legal in Canada by this time next year, and there’s been an explosion in companies cultivating the stuff. 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 pot. The upstart industry is eyeing the U.S. as a potential behemoth market.
Yet, marijuana has fallen into a grey area in the U.S., where eight states have legalized medical and recreational marijuana, including Colorado and Nevada. It is outlawed by the federal government.
No major moves have come against states that have legalized, but many in the Trump administration, Attorney General Jeff Sessions in particular, are no friends of the industry. Major U.S. exchanges, such as the Nasdaq, won’t accept listings for cannabis companies, and banks and other lenders remain wary of the industry.
In the meantime, TMX appears to be taking a case-by-case approach to how it handles companies with U.S. interests. While Aphria is still listed even with its Florida investment, other producers have faced some push back.
Canadian Bioceutical Corp. voluntarily delisted from the TSX Venture Exchange this year when the Toronto-based company was told it couldn’t pursue opportunities in the U.S. recreational market, said CEO Scott Boyes. The uncertainty has hampered the company’s efforts to partner with other larger Canadian firms, he said.
“I just hope when the new policy comes down it’s not punitive to my shareholders,” Neufeld said by phone. “We feel very, very confident what we’ve done is all legal in the concept of Canadian law.”