Skip to main content

In May, Cannabis Wheaton Income Corp., a company that finances other marijuana operations in return for a financial interest in those entities, announced a private placement. Eight Capital and Canaccord Genuity Corp. were the lead underwriters.

The Associated Press

A number of executives at Eight Capital Corp. have left the independent brokerage firm, weeks after it was involved in a controversial, and unsuccessful, financing deal for a new marijuana company.

The departures, which took place over the past month, included former chief executive officer Mark Attanasio and Donato Sferra, who was managing director of investment banking, according to people familiar with the situation.

Mr. Attanasio did not respond to a request for comment, while Mr. Sferra could not be reached. Eight Capital's new CEO, David Morrison, did not respond to a request for comment.

Story continues below advertisement

In May, Cannabis Wheaton Income Corp., a company that finances other marijuana operations in return for a financial interest in those entities, announced a private placement. Eight Capital and Canaccord Genuity Corp. were the lead underwriters.

Read more: Eight Capital switches CEOs after failed cannabis deal

But the deal came undone when it was revealed that certain employees at Eight and Canaccord held significant amounts of Cannabis Wheaton shares, acquired on the cheap, at the same time as they were attempting to raise some $80-million for the marijuana firm.

The Cannabis Wheaton deal illustrates both the Wild West nature of the nascent market for marijuana companies and the potential hazards for those involved in it. Dozens of marijuana companies have gone public on Canadian stock exchanges amid a move toward greater liberalization of drug laws – including a plan by Ottawa to legalize possession and cultivation of it, within limits, next year.

But while investors have flocked to the sector, sensing the chance to get in on the ground floor of a newly legal business, many of the companies are unproven. Most, like Cannabis Wheaton, are relatively small and are listed on junior exchanges, where regulation is less strict. A number of them operate within a legal grey zone. For example, the Toronto Stock Exchange has put an informal freeze on new listings of marijuana companies with U.S. assets because of a lack of clarity surrounding American laws. (Many states have some form of legalized access to marijuana – particularly for medical purposes – but there are still federal statutes that make the drug illegal, and the Trump administration has indicated a preference for enforcing those laws.)

According to a press release issued in May, representatives of Eight and Canaccord owned 13.1 million shares in Cannabis Wheaton and an equal amount of warrants. The holdings, which sources previously said were issued at a deep discount, amounted to roughly 8 per cent of the shares as of May. Mr. Attanasio and Mr. Sferra were among the individuals who owned stock.

The practice of capital markets employees owning seed stock in companies, while not illegal, is generally frowned upon, as it can be perceived as a conflict of interest.

Story continues below advertisement

In the immediate aftermath of the financing deal being called off, Mr. Attanasio initially remained with Eight Capital, but was demoted to managing director of investment banking from CEO. Mr. Morrison succeeded him as CEO.

Eight Capital is one of several independent dealers to benefit from a thriving marijuana sector over the past 18 months. The firm had led or co-led more than a dozen stock sales. Since the controversy at Cannabis Wheaton, the firm's pace of deal-making has slowed, according to data from Thomson Reuters.

In addition to the departures of Mr. Attanasio and Mr. Sferra, Eight has seen a number of other employees leave over the past few weeks. Josh Wolfson, principal, metals and mining research, and Shant Poladian, an investment banker who specialized in the real-estate sector, also recently left the firm, according to sources.

Mr. Wolfson confirmed via e-mail that he had resigned, but did not elaborate.

Mr. Poladian, meanwhile, did not respond to a request for comment. His LinkedIn profile indicates that he left Eight Capital in July. "Grateful to have worked with some bright people at Eight Capital in launching a well-capitalized boutique investment bank over the past year. Look forward to seeing how the business evolves and wish my friends all the best," he wrote in a post on the site.

Eight Capital was spun out of Dundee Corp. in December, 2016, as an employee-owned, independent brokerage firm. Dundee remains a stakeholder via a subordinated loan, but owns no equity.

Story continues below advertisement

Cannabis Wheaton went public in early May via a reverse takeover on the TSX Venture Exchange. The shares traded as high as $2, but have since lost more than half their value, closing on Friday at 75 cents.

Andrew Willis of Report on Business tells investors why they should be wary of buying into private pot businesses going public The Globe and Mail
Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Comments

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 letters@globeandmail.com. 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 letters@globeandmail.com. 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

Comments that violate our community guidelines will be removed.

If your comment doesn't appear immediately it has been sent to a member of our moderation team for review

Read our community guidelines here

Discussion loading ...

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 feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.