, What cannabis companies should know before going public

When a company goes public, it is usually to access a broader pool of capital. But not all public channels are equal—and they’re not equally accessible.

Senior exchanges

Senior exchanges, such as the New York Stock Exchange and Toronto Stock Exchange, have the broadest reach when it comes to capital markets. They also have the highest requirements for companies that list on them. These include number of shares held, minimum trading price and valuation requirements.

Companies that list on senior exchanges also must make regular, detailed filings with a federal securities oversight agency, depending on the country where the exchange is based.

Senior exchanges will not allow companies that operate in a federally illegal industry (including plant-touching cannabis operations) to list, which gives Canadian marijuana companies more options than are available to their U.S. counterparts.

Senior exchanges include:

  • New York Stock Exchange (U.S.)
  • Nasdaq (U.S.)
  • Toronto Stock Exchange (Canada)
  • NEO Exchange (Canada)

 Junior exchanges

Companies on junior exchanges must meet the same regulatory standards as those listing on senior exchanges, but the financial and operating requirements are lower for listing on the junior exchanges. The pool of available capital is still large—but not as large as on senior exchanges.

Junior exchanges also might allow plant-touching cannabis companies to list, even if their business activity is federally illegal where the operator is based. This is why so many U.S. cannabis companies have turned to the Canadian Securities Exchange for their ventures into public trading.

  • Junior exchanges include:
  • Canadian Securities Exchange (Canada)
  • TSX Venture (Canada)

Quote systems

While often listed in news stories in the same manner as exchanges, interdealer quotation systems have different requirements and mechanisms for publicly traded stocks.

Quote systems provide information on the current value of securities for companies that list with them. This information is provided by buyers and sellers expressing the prices at which they are willing to transact. However, the system does not directly participate in any trades. In other words, an investor or broker will make a deal directly with the current securities owner, which might be the company or another investor/broker.

Quote systems are also regulated differently than exchanges. In the United States, the over-the-counter (OTC) markets are overseen by the Financial Industry Regulatory Authority (FINRA) rather than the Securities and Exchange Commission. FINRA also provides an electronic quotation system for OTC stocks, known as the Over-the-Counter Bulletin Board (OTCBB).

There are few filing requirements for companies listing on OTC markets, and companies can be much less transparent about their operations than on formal exchanges.

Quote systems include:

  • Over-the-Counter Bulletin Board (OTCBB)
  • OTC Link
  • Pink

New York Stock Exchange (NYSE)

Market cap: $26.2 trillion*

Number of companies listed: 2,800 (on primary exchange)

Allows plant-touching companies: Only if federally legal where company is headquartered

Sample companies listed on NYSE: Aurora Cannabis (ACB), Pure US Cannabis ETF (MSOS), Scotts Miracle-Gro Co. (SMG)

Nasdaq

Market cap: $19.4 trillion

Number of companies listed: 4,467

Allows plant-touching companies: Only if federally legal where company is headquartered

Sample companies listed on Nasdaq: Canopy Growth Corp. (CGC), GrowGeneration Corp. (GRWG), Tilray (TLRY)

Toronto Stock Exchange (TSX)

Market cap: $3.2 trillion (CA$4 trillion)

Number of companies listed: 1,707

Allows plant-touching companies: Only if federally legal where company is headquartered

Sample companies listed on TSX: Canopy Growth Corp. (WEED), Cronos Group (CRON), Organigram (OGI)

 NEO

Market cap: $3.3 billion (CA$4.1 billion)

Number of companies listed: 1,892

Allows plant-touching companies: Yes

Sample companies listed on NEO: Columbia Care (CCHW), Tilt Holdings (TILT)

 TSX Venture Exchange (TSXV)

Market cap: $80.6 billion (CA$101 billion)

Number of companies listed: 1,892

Allows plant-touching companies: Only if federally legal where company is headquartered

Sample companies listed on TSX-V: Eve and Co. (EVE), The Flowr Corp. (FLWR), Khiron Life Sciences Corp. (KHRN)

Canadian Securities Exchange (CSE)

Market cap: $50.1 billion (CA$63.2 billion)

Number of companies listed: 706

Allows plant-touching companies: Yes

Sample companies listed on CSE: Ayr Wellness (AYR), Green Thumb Industries (GTII), Trulieve Cannabis Corp. (TRUL)

 Market cap figures as of July 2021.