Why Canadian Cannabis Companies With U.S. Businesses Can Still List On NYSE And NASDAQ

By Nina Zdinjak

With cannabis still illegal at the federal level – classified as a List 1 Controlled Substance with “Not Currently Accepted Medical Use” – it’s difficult, if not impossible, for companies in the industry to get on major US exchanges like the New York Stock. Stock Exchange (NYSE) and NASDAQ to be listed.

Neither of these exchanges will accept companies selling cannabis in the United States, even if they operate in states where adult use is now legal. This is because federal law trumps state law. And because federal agencies and the state are inconsistent on this important issue, there is regular confusion and controversy. Is medical marijuana legal in nursing homes and assisted living facilities? Can sports leagues allow athletes to be treated with cannabis? What about the VA?

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Why Choose NYSE or NASDAQ over OTC? What is the difference?

Some may argue that a public company is a public company, regardless of which exchange its shares are traded on. Most companies, however, seek to place their stocks on established and reputable markets such as the NYSE or NASDAQ. Of course this one two exchanges are harder to come by because they have special requirements like minimum stock prices and total market capitalization.

Markets like the OTC (over-the-counter) however, have fewer restrictions. This often makes them the only choice for smaller and lesser-known businesses.

It should be noted that some OTC stocks can be more volatile, with swings leading to quick losses or gains. Additionally, small capitalization stocks are often less controlled and scrutinized by the Securities and Exchange Commission. Because of this, investors tend to feel safer investing in companies trading in the two traditionally prestigious markets.

Is the legwork worth it?

To say the NYSE and NASDAQ are intricate venues for Canadian marijuana companies would be an understatement. Benzinga wanted to find out more, so we reached out to Sebastien St-Louis, President, CEO and Director of Canadian cannabis company HEXO Corp (NASDAQ: HEXO). This cannabis producer is based in Gatineau, Quebec and focuses on the recreational cannabis scene.

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Last year, Hexo expanded its partnership with Molson Coors beverage company and formed a joint venture to bring hemp non-alcoholic CBD beverages to Colorado.

Previously, the two companies joined forces and formed another joint venture to produce a cannabis-infused non-alcoholic beverage called Truss Beverages for the Canadian market.

But Hexo’s focus on the U.S. market doesn’t stop there, especially now that cannabis legalization is in the air. For example, the cannabis giant recently completed the acquisition of a manufacturing facility in Fort Collins, Colorado – the first in the United States

“We are very excited about the zoning for all cannabinoids by the community, which means that once we have state legalization, we already have the community requirements for any THC production,” St-Louis told Benzinga.

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In this way, the company has secured further sales partnerships in Fort Collins, integrated its “Powered by Hexo” solutions and prepares the ground for possible state legalization.

Regarding the Cannabis Administration & Opportunity Act recently introduced by the Senate Majority Leader Chuck Schumer (DN.Y.) and colleagues Sens. Cory Booker (DN.J.) and Ron Wyden (D-ore), St-Louis called the bill “certainly ambitious”.

Although the CEO of Hexo is encouraged by the legalization in the bill, he believes that due to the complexity of the process, it could take another three years to complete. St-Louis doesn’t want to wait that long, said St-Louis: “We are actively pursuing a structure that allows us to legally enter the market faster than full legalization.”

After all, around 80% of US adults from state to state already have access to legal cannabis, St-Louis noted.

Legal activity and hyper-compliance are key

For all things to work, have US business and be listed on NASDAQ, a company needs to be “hyper-compliant”.

“Well, we’re making it legal, and it’s not easy, but we only deal in legal substances and hemp. So everything in Fort Collins is derived from hemp-derived CBD. So we only touch the THC molecule after it has been fully legalized, ”explained St-Louis.

Photo by Austin Distel via Unsplash

And that seems to be the key. Hold on to hemp until US laws change.

Compliance with all government regulations and a super-technical approach has allowed Hexo to be a legal entity operating in the United States and still listed on a major stock exchange.

High targets in Canadian market worth $ 10 billion, US focus

The company is dead serious about its future and expansion strategy as it has made multiple acquisitions, the most recent of which announced the purchase of Canadian cannabis producer Redecan for $ 925 million in cash and shares.

In a few years, the Canadian market could be worth up to $ 10 billion, and St-Louis believes it is dominated by three top players. Hexo aspires to become one of them, and that’s why the company is taking important consolidation steps.

“Right now, on a consolidated basis, we have more market share than the next leading incumbent,” said St-Louis, noting that Hexo already “sells more dollars in cannabis products in Canada than Tilray (NASDAQ: TLRY).”

To add value to its shareholders, the company is targeting a 30% stake in Canada that St-Louis believes is within reach. Hexo’s share in Canada is currently around 17%.

RELATED: Canada Or US: Which Cannabis Industry Is Better Positioned To Go National?

To achieve this goal over the next few years, the company’s merger and takeover strategy is now targeting the United States

While the company has all the licenses required to export to Europe, St-Louis Benzinga stated that its current strategy across Europe is to closely monitor and be ready for the adult market.

“We are not aggressively pursuing the medical market in Europe today. We think the market is too saturated and, like in Canada, will focus on recreational use when it opens up. “

This article originally appeared on Benzinga and was republished with permission.