Aurora Cannabis is vowing to not be a spectator as rival Canopy Growth continues to plow hundreds of millions of dollars into high-growth U.S. CBD and medical marijuana markets.
Aurora CCO Cam Battley told Jefferies analyst Owen Bennett that the Alberta company is closely watching developments in the United States.
“Having a major presence in the U.S. is nonnegotiable for any cannabis company that intends to call itself a global leader,” Battley told Bennett in a video interview.
The interview was filmed the day before Ontario-based Canopy Growth announced a groundbreaking deal to buy Acreage Holdings of New York for $3.4 billion, conditional on the U.S. federal government removing federal prohibition.
Canopy is aggressively entering U.S. markets, having already laid out plans to invest up to $150 million in New York in hemp.
Analysts see capital-rich Canadian cannabis companies following Canopy’s lead.
“Whether legalization occurs or not, we think the prospect of legalization, an event which could lift U.S. asset prices, prompts Canadian companies to accelerate U.S. strategies, and see some announcing deals in the U.S. before legalization,” Bank of America Merrill Lynch analyst Chris Carey wrote in a recent report.
Exchange rules bar companies on the Toronto Stock Exchange and the TSX Venture Exchange from capitalizing on U.S. cannabis businesses – except hemp, which is federally legal.
Canadian medical marijuana companies – rich in capital but limited by a relatively small Canadian market – are going international to tap growth.
For its part, Aurora holds warrants that would allow it to acquire an ownership interest in the Las Vegas-based investment company Australis Capital – if and when the U.S. government ushers in medical cannabis-friendly laws.
Aurora spun off Australis Capital last year to focus on American cannabis opportunities.
“We’re not waiting for things to change on a regulatory basis in the U.S.” Battley said.
“We’ve already entered through our spinoff company, Australis Capital, through which we have a ‘back in’ right, and it is already assembling a suite of attractive assets and capabilities in the U.S.”
Jefferies initiated coverage of the cannabis industry in February, forecasting a “base-case conservative” market worth roughly $50 billion in the next decade.
Acreage shares trade on the Canadian Securities Exchange as ACRG.U.
Matt Lamers can be reached at email@example.com