The Canadian Listing Does Not Matter for American Cannabis Companies
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Friends,
After the market closed on Friday (9/5), S&P Dow Jones Indices announced that five stocks would be joining the S&P/TSX Composite Index on 9/22, including Curaleaf. Since then, CURLF has gained 0.4%, increasing a lot on Tuesday but pulling back yesterday. Not surprisingly, the company trumpeted its success in a press release on Monday morning, suggesting it would boost institutional ownership.
Curaleaf listed on the Toronto Stock Exchange in late 2023, migrating from the Canadian Securities Exchange, where most of the MSOs accessed the market originally. TerrAscend was the first to move to the TSX, and Verano moved to the CBOE Canada a bit ahead of the Curaleaf move to the TSX, which was announced in October 2023 and which happened in December 2023. Cannabist originally listed on the NEO, which became CBOE Canada, and it gave up its CSE listing in 2023.
In the two years or so since these MSOs made their moves, no other MSOs have followed. Given that no other MSOs have migrated from the CSE since Curaleaf did so in late 2023, it probably does not make sense to do so. Sure, the CSE has some challenges, but the bigger issue is that these are American companies. Where the trading matters is in the U.S. and not in Canada. Nothing against Canada, but listing on the TSX doesn’t really change things. In late 2022, I called out uplisting from the OTC as a major potential catalyst.
In this newsletter in October 2023, I called it a waste of time for American cannabis companies to upgrade to the TSX. Looking at the price action since that newsletter was published for the Tier 1 and Tier 2 names, one of the nine MSOs has rallied, and the rest have declined:
Readers should keep in mind that the cannabis sector has declined by a lot during this time, with the NCV Global Cannabis Stock Index down 16.6% to 6.90. The American Cannabis Stock Index has dropped 21.8%, and MSOS has plunged 34.0%. The average return of these 9 largest MSOs has been even worse, but it is heavily impacted by AYR Wellness, which has been halted in Canada but continues to trade on the OTC.
Looking at the returns, I would not conclude that the trading exchange in Canada has mattered at all. One of the TSX-listed stocks has done a bit better than its peers, while one has done worse. A lot more than the Canadian listing drives the stocks. I was shocked in June when I was doing the quarterly rebalancing of the Global Cannabis Stock Index that Curaleaf dropped out due to insufficient trading volumes. Only 3 MSOs qualified, Trulieve and GTI and also Glass House Brands, which trades in Canada on the CBOE Canada (and is up 72.7% since 10/13/23). Curaleaf trading volume in Canada over the past month has been 1.14 million shares per day on average, which is less than it trades on the OTC. TerrAscend has averaged 463K shares per day over the past month, which is a lot less than its average on the OTC in excess of 1 million shares per day. Looking at the other MSOs that trade on different exchanges in Canada, they have been having higher trading volume on the OTC.
Curaleaf and TerrAscend were so proud two years ago to uplist in Canada to the TSX, but it hasn’t really mattered. As I have been saying now for several years, what matters is 280E taxation and the OTC. Hopefully, 280E ends soon, but, even if cannabis is rescheduled, there is no necessary change by the NASDAQ or the NYSE regarding American cannabis companies. Hopefully, that changes too!
Sincerely,
Alan
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is what we published this past week:
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Florida’s Cannabis Market Continues to Crumble
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