Cannabis prospectuses in Ontario fell dramatically in 2023, data shows

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The number of prospectuses filed in Ontario by cannabis companies in connection with public offerings of securities declined dramatically in 2023 compared to previous years, according to new data from the Ontario Securities Commission.

Experts say that largely stems from a combination of decreased investor interest in the downtrodden marijuana sector, companies wanting to limit shareholder dilution amid low stock prices and macroeconomic headwinds such as rising interest rates.

Overall, 407 prospectuses were filed in Ontario for public offerings across a wide range of industries, down meaningfully from 702 in 2022. (A prospectus is a disclosure document a company must issue before offering investment securities to the public.)

However, the decrease in public offerings for cannabis businesses in particular was much more pronounced than the overall market, as capital became harder to come by for recreational and medical marijuana companies.

“The need for capital is still there, but probably a lot of (cannabis) companies would prefer not to raise equity at presently depressed stock levels, and that way prevent shareholder dilution,” Pablo Zuanic, managing partner of Zuanic & Associates in New York told MJBizDaily via email.

Zuanic also said it’s a demand issue, as investor interest might not be there.

“I also think there are fewer companies in a position to raise capital, hence fewer prospectuses issued,” he said.

Among the prospectuses filed in Ontario across all industries in fiscal 2023, roughly 4%, or about 16, were by businesses operating in the cannabis space, according to the Ontario Securities Commission (OSC) data.

That’s a big decrease.

In fiscal 2022, Ontario companies operating in the cannabis industry issued approximately 42 prospectuses, accounting for about 6% of all prospectuses.

As a percentage of all prospectuses issued in Ontario, 2023 was the lowest year for cannabis companies since 2017, when they also accounted for roughly 4% of the total.

Cannabis was legalized in Canada in late 2018.

In 2021, cannabis companies accounted for about 13% of the prospectuses filed in Ontario and 11% in 2020.

At their peak in 2019, Ontario cannabis issuers filed the second-most prospectuses among all industries, accounting for 14% of all the prospectuses issued that year.

Around mid-2019, cannabis industry issuers in Ontario accounted for 3% of the aggregate market capitalization of Ontario reporting issuers, which at the time amounted to almost 1.5 trillion Canadian dollars ($1.1 trillion).

In the latest annual report, for fiscal 2023, cannabis company valuations had fallen so much that the OSC labeled their composition of the aggregate market cap of all Ontario reporting issuers at 0%, meaning they were statistically insignificant relative to the province’s aggregate market cap.

Read the Corporate Finance Branch annual reports for 2020, 2021, 2022 and 2023.

Matt Lamers can be reached at