Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Part of cannabis and investing

Officially, Canopy Growth Corp. is steering clear of investments in the United States. Over the past year, however, Canada’s largest cannabis company and its affiliates have been quietly securing U.S. exposure through a series of legal manoeuvres that stay onside of Toronto Stock Exchange rules but position Canopy for a rapid move into the U.S. market.

Since October, 2017, TMX Group Ltd., the exchange’s parent, has not let TSX-listed cannabis firms operate in the United States, where marijuana remains federally illegal. That has forced companies to think creatively, spinning off subsidiaries, swapping shares and lining up conditional warrants, which allow them to acquire future positions in U.S. companies.

One of Canopy’s moves became clear at the end of November when Slang Worldwide Inc., a company run by long-time Canopy allies, filed a preliminary prospectus to list on the Canadian Securities Exchange. Toronto-based Slang is in the process of acquiring a handful of U.S. assets, including Denver-based Organa Brands, owner of several popular vaporizer, edibles and concentrate brands.

Story continues below advertisement

What the prospectus shows is that Canopy owns conditional warrants in Slang, giving it the ability to acquire 20 per cent of the company, “following the day that cannabis and cannabis-related products are legalized under applicable federal laws in the United States.”

Exercising these warrants would give Canopy instant exposure to established marijuana-related brands in several U.S. states. (It had previously licensed Organa Brands’ intellectual property for Canada.) More importantly, “what it becomes is shelf space [in U.S. dispensaries], it becomes channel access," said Bruce Linton, co-chief executive of Canopy.

These kinds of conditional investments – which hinge upon U.S. federal reform or a change to TSX policy – are becoming increasingly popular among cannabis companies, said Eric Foster, head of Dentons Canada LLP’s cannabis practice and the legal architect behind the Slang warrants.

"Licensed producers that are focused on cultivation in Canada and who have a lot of capital because they accessed capital markets earlier in the year … they’re looking to deploy that capital, and increasingly they’re going to look south,” Mr. Foster said.

“There’s a general perception that the U.S., at the end of the day, is going to be the biggest market in the cannabis industry, and the time to get in is sooner rather than later," he said.

In September, Aurora Cannabis Inc. belatedly spun off its U.S. assets into a separate company called Australis Capital Inc., distributing Australis shares to Aurora shareholders, similar to a dividend. The company retains a buy-back option, allowing it to reacquire 40 per cent of Australis upon a change to TSX policy or U.S. federal cannabis laws – 20 per cent at the market rate and 20 per cent at the spin-off price.

"We had to divest our U.S. assets, and so we decided to do that in a strategic way that also created opportunities for the company,” said Cam Battley, Aurora’s chief corporate officer.

Story continues below advertisement

Australis is “viable in its own right,” he said, and free to pursue “assets that are undervalued because of the fragmented nature of the U.S. system." So far it’s invested in a Nevada cannabis producer, a rolling-machine company and a firm that designs smartphone apps.

Several other Canadian companies, notably Aphria Inc. through its former subsidiary Liberty Health Sciences, are pursuing similar strategies. None, however, is approaching the United States from as many angles as Canopy – freshly financed with $5-billion from Constellation Brands Inc.

Both Canopy and Canopy Rivers Corp. – a partly owned subsidiary that acts as Canopy’s venture capital arm – recently rejigged their investment in an Ontario company called TerrAscend Corp., swapping common shares for exchangeable shares that would automatically revert back to common stock if and when U.S. federal law changes. TerrAscend is now pursuing retail, extraction and cultivation assets in the United States, Mr. Linton said.

Canopy is also lining up U.S. greenhouses. When it acquired a stake in several B.C. greenhouse properties in 2017, it gained an option to buy a large greenhouse in California, Mr. Linton said.

Canopy Rivers has likewise teamed up with Ontario tomato-grower Paul Mastronardi to retrofit a 1.3-million-square-foot greenhouse in Leamington, Ont.

The joint venture, called PharmHouse Inc., is designed to be replicated internationally. Canopy Rivers and a numbered company directed by Mr. Mastronardi – the chief executive of Sunset brand vegetable-grower Mastronardi Produce Ltd. – have signed a non-compete agreement giving Canopy Rivers the first right of refusal to participate in any future cannabis plays the numbered company pursues internationally.

Story continues below advertisement

“These guys are very substantial, top-tier producers of the sorts of products that end up in Costcos throughout the world. And they have assets in four, five, six countries,” Mr. Linton said.

“Any greenhouse they have, or will create, or invest in, that converts to the production of cannabis, we’re a 50-per-cent partner," he said.

Available now: Cannabis Professional, the authoritative e-mail newsletter tailored specifically for professionals in the rapidly evolving cannabis industry. Subscribe now.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies