M&A, financings explode in cannabis sector – Lexpert

Feb 1, 2018

Recreational marijuana use is scheduled to become legal in Canada on July 1 – and that’s sparked a wave of consolidations, new financings and public offerings in the cannabis sector. In an article in Lexpert, Sandra Rubin explores this burgeoning – and quickly evolving – market by examining the state of affairs in Canada as well as the impact of the cannabis laws in the U.S. Rubin reports that pot companies that are trading on the Toronto Stock Exchange such as Canopy Growth Corp. and Aphria Inc. are regularly in the top stocks traded by volume change each day. She consults Mark Trachuk, partner in Osler’s Corporate Group and a key contact for the firm’s Cannabis Industry Group, for his take on the situation.

“In terms of a new industry that effectively didn’t exist two years ago, it’s a kind of once-in-a-career opportunity – maybe twice-in-a-career. It smells a bit like the dot-com days,” Mark says. “I’m thinking of the trading patterns, the rush to large capitalizations, the multiple-to-revenue [ratio], and in terms of the volume of trading. It’s enormous.”

He also comments on what’s coming, including consolidations where companies with high share prices will grow by using their stock price to purchase smaller companies. By way of example, Mark points to Aphria’s recent acquisition of B.C.-based Broken Coast Cannabis Inc. for $230-million in which all but $10 million of the purchase price was paid for in stock. 

To learn more about ongoing changes in the cannabis sector, read Sandra Rubin’s article “M&A, financings explode in cannabis sector” in the January 30, 2018 online edition of Lexpert.