Canopy Growth Corp. responded to Aurora’s acquisition of MedReleaf by applying to become the first cannabis producer to be listed on NYSE. How will the Wall Street react?
Canopy Growth is one of two biggest pot producers in Canada and currently trades on the Toronto Stock Exchange under the ticker TSE: WEED, but by the end of this month they might start trading on the NYSE as well.
This move would make Canopy Growth the first cannabis company to be a part of the Wall Street, something that American cannabis companies can only dream of in the next few years.
Canopy Growth CEO Bruce Linton said that there were thoughts of applying for admission to the NASDAQ as well, however, they chose NYSE because of the additional credibility it lends his company.
This is not the first time a Canadian cannabis company got listed on a US stock exchange, as Canopy’s rival Cronos Group got listed on NASDAQ, and keep in mind that their offices are located on Broadway.
Enough to keep Aurora at bay?
Seeing how Aurora Cannabis made their big move on MedReleaf last week, Canopy Growth answered with an application to the NYSE, but will that be enough?
Even though Aurora has been a relatively new player on the cannabis market, their smart moves and acquisitions have quickly put them atop of the Canadian market.
Aurora sold its first legal gram in 2016, while at that time Canopy Growth was already well set to become the biggest cannabis company in Canada.
So, what did Aurora do? Well, for starters they started developing new facilities in order to match Canopy’s already established infrastructure, but not only that.
Aurora made a couple moves and acquisitions in 2017 that really cemented them as the de facto leader of the global market — they went ahead with partnerships in foreign countries.
By acquiring a piece in a Danish producer, and being granted contracts with the German and Italian government, Aurora created a demand that it couldn’t keep up with.
That is exactly the reason why Aurora went ahead with the big acquisitions of CanniMed and MedReleaf.
By adding their facilities and production lines to its own brand, Aurora made it so that they can now produce over 500 tons of cannabis every year.
Keep in mind that a report this month estimated that Canadian consumption of cannabis will reach 800 tonnes per year by 2020.
Even though Canopy Growth doesn’t have any operations south of the border and is fully compliant with the laws in the US and every country where it operates, could this have been a bad move by Linton?
Well, he thinks that this move was a no-brainer.
“One of the primary drivers of this listing is, as we are expanding globally, having U.S. institutional investors helps,” Linton said. “I think the investment community has to drop the pot jokes and talk about the investment grade opportunity.”
Once the combined revenues of Aurora, CanniMed and now MedReleaf are added up together, they total around $31 million in the last quarter.
That number is a bit lower when it comes to Canopy Growth, which still had a more-than-decent quarter, earning a total of $21.7 million.
Canopy Growth spokesperson Jordan Sinclair mentioned that even though this acquisition was definitely a good move by Aurora, it wasn’t the smartest one they could have made.
Reason for that is that the whole $3.2 billion will be paid through shares of Aurora (3 Aurora’s for each of MedReleaf’s shares), unnecessarily further diluting the shares of the company.
Sinclair believes that if Aurora wanted the money, they could have got it from almost any bank in Canada.
“There isn’t a cannabis company in Canada that hasn’t had unfettered access to equity financing over the last year. It’s not a challenge to get funding, to have money in the bank. We could call a bank tomorrow and say, ‘We would like to have $400 million, please.’ ”
There are multiple schools of thought when it comes to which company is better at the moment, and which one will perform better in the future.
Ones say Canopy is on the way to total market domination with its upcoming 5.6 million square feet of space which should be built into several facilities.
The other ones say that Aurora has the necessary hype, money, and structure built around it that which simply make it too big to fail.