Canada As A 'Launching Pad': Tips For Taking Cannabis Companies Public

Barrington Miller, director of client listed services at the Canadian Securities Exchange, and Maruf Raza, partner at MNP LLP, sat down Thursday at the Benzinga Cannabis Capital Conference to discuss taking cannabis companies public.

In the last four to five years, there has been an explosion of interest in taking cannabis companies public. Going live on an exchange allows for fundraising, as well as the spreading of ownership risk. 

“Really, up until a few months ago, the first wave of U.S. companies were coming up to Canada. They were stuck and needed expansion capital,” Miller said. 

Click here more information about the upcoming Benzinga Cannabis Capital Conference Oct. 22-23 in Chicago. 

Mostly, U.S.-based cannabis companies have chosen CSE fundraising avenues, raising billions in the last few years through equity offerings.

Miller and Raza said many companies are unprepared and overly ambitious.

“From the financial side, there have been a few roadblocks for cannabis companies, particularly those in cultivation. You have to go do a lot of work to prove to the regulators and auditors that [financial] numbers are accurate,” Raza said. 

Firms overlook the fact that cannabis plants are carried at market value, he said, adding that the oversight can cause uncertainty and invalidate historical statements. 

To ensure financial and legal matters do not bog down a listing, Miller recommends the following: 

• Hire an auditor first.
• Consider share structures.
• Don’t overvalue.
• Disclose everything.
• Listing costs are substantial, but fall after the IPO, Miller said. 
• "[In] year one, you're looking at over $20,000. In year two, the cost is $650 per month." 

As regulation and acceptance of the cannabis space evolves, the two said they expect expect that Canadian exchanges will help companies go to market across the world.

"Some U.S. companies are using Canada as a launching pad: a platform to enter the world," Raza said. 

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Maruf Raza, left, of MNP LLP, and Barrington Miller of the Canadian Securities Exchange chat Thursday at the Benzinga Cannabis Capital Conference in Detroit. Photo by Dustin Blitchok.