U.S. pot firm looks to NEO for listing in Toronto
American cannabis company Columbia Care Inc. made its rather unconventional public market debut on Monday, choosing to list on the little-known Toronto-based Aequitas NEO Exchange via a merger with a special purpose acquisition company (SPAC) created by investment firm Canaccord Genuity Group Inc.
The New York-based multistate medical marijuana operator opened its first day of trading with a share price of $11.60 and a market capitalization of more than $2 billion, making it the first company worth over $1 billion to list on the NEO Exchange, which handles more than 10 per cent of total Canadian trading volume.
Columbia Care chose an atypical method of going public. Instead of the usual IPO or Reverse Takeover (RTO) transaction, it merged with Canaccord Genuity Growth Corp., a SPAC created by the investment firm on the NEO Exchange with the purpose of attracting an American pot firm to go public in Canada.
“In this particular case we sold $40 million of effective blind pool cash into a public vehicle and then we said look, if someone wants to go public they can just merge with our SPAC,” Canaccord’s president and chief executive Dan Daviau said. “Our plan was to make a cannabis company.”
With the transaction complete, Canaccord owns just under two per cent of Columbia Care, according to Daviau, who called his firm’s stake in the pot company “relatively negligible.” Canaccord will have no control over the management or ownership structure of Columbia Care, Daviau confirmed. “It’s their company they run it. We just give them the SPAC.”
In a SPAC transaction, the investment firm that creates the special vehicle usually ends up with stock in the company that uses the SPAC to go public, which could potentially be more lucrative than a flat commission from running a deal.
Pot firms with U.S. assets looking to access Canadian public markets are not allowed to list on exchanges operated by the TMX due to pot not being legal on a federal level south of the border. That rule has transformed the Canadian Securities Exchange into the primary pot exchange for American companies, especially over the last year. But the NEO Exchange appears to be emerging as an alternative to the CSE for American cannabis companies or Canadian cannabis firms with U.S. assets.
“Because the NEO is a senior exchange, unlike the CSE, this was a transaction reviewed by the Canadian regulators, and required us to have three years of audit according to IFRS and US GAAP standards,” said Columbia Care CEO Nicholas Vita. “We thought it was important investors knew everything about us.”