The Evolution of the CSE in the Global Cannabis Industry
August 6th, 2019
Policy, Top News
There’s no doubt that cannabis has been a game-changer for the Canadian capital markets. After Canada liberalized its medical program in 2012, companies immediately began approaching the Canadian Securities Exchange (CSE) to raise the capital required to build indoor greenhouses and participate in a market that they knew would continue to grow over time.
In 2015, U.S. cannabis companies began to capitalize on state-by-state cannabis legalization frameworks. They couldn’t raise capital in the United States due to the plant’s federal status, which meant that they turned to Canada and the CSE to raise the capital that they needed to fund massive projects. These trends really began to expand in 2018 with multi-state operators.
Zuber Lawler’s Managing Partner Tom Zuber recently interviewed CSE CEO Richard Carleton in CFN Media’s studio in a three part series:
What Makes the CSE Unique?
There’s no doubt that it’s easier to be a public company in Canada than the United States. From exchange fees to officer insurance, the regulatory burden and cost of being a publicly traded company is much lower. These lower costs make the country more attractive for smaller businesses that cannot afford the significant costs of a U.S. listing.
For example, Canada has become a go-to country for oil and gas and mining exploration companies looking to raise under $10 million with market capitalizations of around $20 million to $50 million. By comparison, most companies that go public in the United States need to raise hundreds of millions of dollars and achieve market capitalizations of $1+ billion.
The CSE’s approach to the cannabis industry, in particular, has also set it apart from other exchanges. Rather than taking a paternalistic approach, and making judgements on companies, the exchange is focused on ensuring that each company’s disclosure is complete and understandable by retail investors, who can then make their own informed decisions.
U.S. Companies Look to the CSE
The Canadian Securities Exchange began to see U.S. issuers interested in listing on the exchange in late 2015. While the exchange had already listed Canadian cannabis companies, the decision to list U.S. companies was complicated by the fact that they had to provide an opinion that businesses would operate under applicable laws in their jurisdictions.
While the Controlled Substances Act made it difficult to make that assertion, the exchange focused on helping companies come up with a complete disclosure that outlined those risks and helped investors understand them in detail. The SEC had also approved a prospectus for a U.S. issuer that touched the plant by that point, so there was some support south of the border.
By 2018, U.S. multi-state operators, or MSOs, began to approach the exchange. These listings were significantly more complicated than companies focused on a single state since the disclosures were much longer. Many of these companies also had complex cap tables with multiple share classes, which made it hard for investors to determine valuations.
What’s Next for Cannabis & the CSE?
The cannabis industry certainly shares some similarities with the rise of Internet companies. Many companies have achieved lofty valuations, including many Canadian cultivators, but there will be many long-term winners that emerge from the current market conditions. For example, Amazon’s and Google’s of the cannabis industry may already be present.
The global cannabis industry also continues to emerge. In addition to North America, Europe is quickly becoming the next major growth market. Many countries are liberalizing their cannabis laws and the CBD wellness market is already very well established. Many Canadian companies are quickly moving into the space to fill the void with joint ventures and investments.
For the CSE, the big question is whether they will continue to be a winner after legalization takes hold. The legalization of cannabis in the U.S. could open the door to U.S.-based listings, where the capital markets run much deeper. The answer to that question remains to be seen, but for now, the CSE continues to be the go-to exchange for cannabis companies around the world.
This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.
Follow Us on Social Media
About CFN Media Group
CFN Enterprises Inc. (OTCQB: CNFN) owns and operates CFN Media Group, the premier agency and financial media network reaching executives, entrepreneurs and consumers worldwide. Through its proprietary content creation, video library, and distribution via www.CannabisFN.com, CFN has built an extensive database of cannabis interest, assisting many of the world’s largest cannabis firms and CBD brands to build awareness and thrive. For more information, please visit www.cfnenterprisesinc.com.
Disclaimer: Matters discussed on this website contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. CFN Media Group, which owns CannabisFN, is not registered with any financial or securities regulatory authority and does not provide nor claims to provide investment advice or recommendations to readers of this release. CFN Media Group, which owns CannabisFN, may from time-to-time have a position in the securities mentioned herein and will increase or decrease such positions without notice. The Information contains forward-looking statements, i.e. statements or discussions that constitute predictions, expectations, beliefs, plans, estimates, or projections as indicated by such words as "expects", "will", "anticipates", and "estimates"; therefore, you should proceed with extreme caution in relying upon such statements and conduct a full investigation of the Information and the Profiled Issuer as well as any such forward-looking statements. Any forward looking statements we make in the Information are limited to the time period in which they are made, and we do not undertake to update forward looking statements that may change at any time; The Information is presented only as a brief "snapshot" of the Profiled Issuer and should only be used, at most, and if at all, as a starting point for you to conduct a thorough investigation of the Profiled Issuer and its securities and to consult your financial, legal or other adviser(s) and avail yourself of the filings and information that may be accessed at www.sec.gov, www.pinksheets.com, www.otcmarkets.com or other electronic sources, including: (a) reviewing SEC periodic reports (Forms 10-Q and 10-K), reports of material events (Form 8-K), insider reports (Forms 3, 4, 5 and Schedule 13D); (b) reviewing Information and Disclosure Statements and unaudited financial reports filed with the Pink Sheets or www.otcmarkets.com; (c) obtaining and reviewing publicly available information contained in commonlyknown search engines such as Google; and (d) consulting investment guides at www.sec.gov and www.finra.com. You should always be cognizant that the Profiled Issuers may not be current in their reporting obligations with the SEC and OTCMarkets and/or have negative signs at www.otcmarkets.com (See section below titled "Risks Related to the Profiled Issuers, which provides additional information pertaining thereto). For making specific investment decisions, readers should seek their own advice and that of their own professional advisers. CFN Media Group, which owns CannabisFN, may be compensated for its Services in the form of cash-based and/or equity-based compensation in the companies it writes about, or a combination of the two. For full disclosure, please visit: https://www.cannabisfn.com/legal-disclaimer/. A short time after we acquire the securities of the foregoing company, we may publish the (favorable) information about the issuer referenced above advising others, including you, to purchase; and while doing so, we may sell the securities we acquired. In addition, a third-party shareholder compensating us may sell his or her shares of the issuer while we are publishing favorable information about the issuer. Except for the historical information presented herein, matters discussed in this article contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. CFN Media Group, which owns CannabisFN, is not registered with any financial or securities regulatory authority, and does not provide nor claims to provide investment advice or recommendations to readers of this release. CFN Media Group, which owns CannabisFN, may from time to time have a position in the securities mentioned herein and will increase or decrease such positions without notice. For making specific investment decisions, readers should seek their own advice and that of their own professional advisers. CFN Media Group, which owns CannabisFN, may be compensated for its Services in the form of cash-based and/or equity- based compensation in the companies it writes about, or a combination of the two. For full disclosure please visit: https://www.cannabisfn.com/legal-disclaimer/.