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An employee of MedMen walks into the dispensary of the store on New York's Fifth Avenue on April 20, 2018.

Richard Drew/The Associated Press

Another American cannabis company is listing its shares in Canada, sparking investor interest in U.S. pot stocks at a time when many listed marijuana producers already enjoy steep valuations.

The latest to go public is MedMen Enterprises Inc., the cannabis grower that is known for its dispensaries in California, Nevada and New York State that try to emulate the look and feel of Apple stores. Its shares began trading on Tuesday on the Canadian Securities Exchange (CSE), a stock market that has allowed cannabis firms doing business in the United States to be listed even though the drug is illegal under federal U.S. laws.

MedMen operates in states that have legalized marijuana in some form, which is enough to satisfy the CSE, but not TMX Group Ltd., Canada’s largest operator of stock markets. Canadian investors have invested in U.S. operators to diversify their holdings and access a segment of the North American market that can sell a broader suite of higher-margin products, like edibles and vape pens.

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Shares of MedMen closed at $4.95, 12 per cent lower than where they opened on Tuesday.

Los Angeles-based MedMen has been trying to make a name for itself by opening dispensaries in high-traffic spots, such as on Fifth Avenue in New York and in Beverly Hills, Calif. That is a deliberate strategy, says Adam Bierman, chief executive officer of MedMen. He wants his stores to be seen there in order to build a strong brand.

MedMen is now looking to expand into other states, such as Florida and New Jersey, and pursue a retail strategy in Canadian provinces where privately run stores are permitted, such as in Alberta, via a joint venture with Cronos Group Inc.

To fuel its growth, MedMen raised US$110-million based on a US$1.65-billion valuation, an offering that was led by Canadian investment banks Cormark Securities Inc. and Canaccord Genuity Corp. Mr. Bierman said his goal is to eventually turn MedMen, which today has 800 employees, into a company worth as much as US$50-billion.

“The way you build a US$25-[billion] to US$50-billion company in this industry is you build the strongest brand first in the most important marijuana markets that exist on the globe today,” he said on Tuesday by phone.

“New York City matters. Fifth Avenue matters. Beverly Hills, California, matters. Las Vegas, Nevada, matters. Exporting that brand to MedMen Paris, or MedMen Tel Aviv, or MedMen Toronto, that’s not the hard part.”

In the last six months to Dec. 31, financial records show MedMen booked just US$3.3-million in sales and a loss of US$15-million. However, Mr. Bierman says most of MedMen’s revenue in the near term will be generated in its dispensaries in California, which legally blessed the sale and use of recreational cannabis in January.

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At MedMen, nearly all of the voting rights will be held by Mr. Bierman and company president Andrew Modlin, who each own nearly one million supervoting shares that are entitled to 1,000 votes apiece. The rest of the shares are ranked lower, are entitled to one vote each and have no say in the event that a takeover bid for the supervoting shares is made.

Both Mr. Bierman and Mr. Modlin will earn a base yearly salary of US$1.5-million and will be granted a US$4-million cash bonus when MedMen exceeds an enterprise valuation of US$2-billion. Both of them are also entitled to receive US$10-million worth of units that can be converted into the lower-ranked shares and another US$30-million in units that will vest monthly over the next two years, at which point they can also be converted into lower-ranked shares.

When asked about their salaries and the supervoting shares, Mr. Bierman said: “At the end of the day, we are where we are because Andrew and I have put together the systems, the processes and the people that we’ve needed to execute. It’s about Andrew and I making sure that we can continue to make the best decisions for the long term of this company.”

The CSE says it has 375 listings. Seventy-six are in the cannabis sector and account for 60 per cent of the $9.3-billion market capitalization of companies listed on the exchange. New York-based Acreage Holdings and Illinois’s Green Thumb Industries LLC are among several U.S. cannabis companies that are eyeing a future listing on the CSE.

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