While the U.S. legal cannabis industry continues to chafe at federal illegality, our friends in the Great White North are raking in the dough as they await October 17, when adult use of marijuana becomes legal in the country.
Last week it was announced that Canopy Growth, a Canadian marijuana firm, is buying Toyko Smoke cannabis owner Hiku Brands Co, another Canadian company, for C$269.2 ($205.3 million).
Canopy Growth, which debuted its IPO on the New York Stock Exchange in late May, offered 0.046 of its shares, or C$1.91 per share, for each share of Hiku held, according to Reuters. The news outlet reported that Hiku was so enticed by Canopy Growth’s takeover bid that Hiku dropped its previous deal with WeedMD Inc, a licensed Canadian medical marijuana producer.
The Canopy Growth acquisition comes on the heels of the firm acquiring BC Tweed, a medical marijuana firm in British Columbia, for C$374 million (about $284 million), reported Crunchbase.
Canopy Growth was the second Canadian cannabis company to trade on a major U.S. exchange, with the first one being Cronos Group Inc, which went public this past February on the NASDAQ. Joining them on the IPO carousel is Tilray, another Canadian cannabis firm. A portfolio company of Seattle-based Privateer Holdings, a private equity firm focused on the legal cannabis sector, Tilray is set to list its stock this Thursday under the ticker symbol “TLRY” on the NASDAQ. Interestingly, Tilray will not trade on a Canadian exchange.
Is it a coincidence that both Cronos and Canopy Growth rolled out IPOs this year—and now Tilray--when marijuana legalization will soon become a reality in Canada? Here’s another rhetorical question: What do you think?
And let’s not forget that earlier this year, Aurora Cannabis Inc, a leading medical marijuana producer in Canada, agreed to acquire smaller rival CanniMed Therapeutics Inc for C$1.1 billion or $852 million. The closing of the deal will “create the world’s top marijuana producer by market value,” said Reuters at the time the transaction was announced.
According to the latest projections from San Francisco-based ArcView Group, a marijuana research and investment firm, in partnership with Boulder-based BDS Analytics, a cannabis focused market researcher, the Canadian legal cannabis sector is estimated to generate $1.3 billion for 2018. Breaking down that sum, the medical market is projected to take in $600 million while the adult/recreational use market is estimated to pull in $700 million.
By 2022, the forecast is even more robust--$5.4 billion for both the medical and recreational markets, with $500 million for medical and $4.9 billion for adult use.
Why the slight dip in medical marijuana sales in 2022 versus the 2018 projection?
BDS Analytics’ Tom Adams cites two factors: the legalization of the adult use market in Canada and the country’s already tightly regulated medical market.
This means as availability and accessibility on the recreational front increases, the number of patients bypassing regulatory loopholes to obtain medical marijuana at the nearest stores may likely increase as well. With Canada being the first major country to legalize recreational marijuana, how it handles regulation and taxation is sure to be a litmus test for the rest of the world.
“It’s really going to be the canary in the coal mine as Canada tries something no one ever else has done, which is replace a thriving illicit cannabis trade, which every country has, with one that is taxed and carefully controlled at every level,” says Adams.
