U.S. cannabis company Columbia Care LLC is going public in Canada at a valuation of $1.35-billion – the takeover target of a special-purpose acquisition corporation, or SPAC, launched by Canaccord Genuity Corp. last month.
A vertically integrated grower and retailer with licenses in 13 states, Columbia Care is the latest in a string of U.S. companies to list, or who plan to list, on Canadian exchanges at valuations north of $1-billion. The company claims to be the largest U.S. multi-state medical operator and reports having 60 dispensaries and 16 cultivation and manufacturing facilities “in various stages of operation and development, all of which will be operational by the end of 2019.”
Canaccord Genuity Growth Corp., the SPAC for the Columbia Care deal, raised US$85.1-million in a pre-transaction private placement, selling shares for US$2.30, the company announced Thursday. The Canaccord SPAC is listed on the Aequitas NEO Exchange
In the lead up to legalization of recreational cannabis in Canada, most eyes have been on Canadian companies and their staggering valuations. Investment banks like Canaccord, however, who made a killing banking the Canadian cannabis sector over the past three years, have already shifted their focus to large multi-state U.S. operators.
Because of limited access to capital – due to U.S. banking restrictions – many of these large players are undervalued in relation to their Canadian peers, despite huge potential for growth.
Canaccord got the ball rolling in May, when it co-led a US$130-million raise for California-based dispensary chain MedMen Enterprises Inc., as part of MedMen’s reverse takeover (RTO) listing on the Canadian Securities Exchange (CSE). Other U.S. companies had listed on the CSE, (one of two Canadian exchanges, alongside the NEO Exchange, to permit listings by cannabis companies with U.S. operations). But the MedMen RTO was a wholly different scale, with the company sporting an initial market cap of more than $2-billion.
An RTO from Chicago-based Green Thumb Industries followed in June, with a syndicate co-led by Canaccord and GMP Securities L.P. helping GTI raise $87-million in go-public financing. Just this week, GTI announced another $101.66-million bought deal financing led by GMP.
Other large private U.S. operators, including Curaleaf Inc. and Acreage Holdings (which just signed up former prime minister Brian Mulroney as a board member), are preparing to list in Canada in the coming weeks. And we’re starting to see major transactions between U.S. companies already listed on the CSE.
On Thursday, iAnthus Capital Holdings, Inc. announced it was merging with MPX Bioceutical Corp. in what the companies called “the first public to public merger transaction in U.S. cannabis history.” The all-stock deal, reportedly “valued at $835-million” with caveats, will create a company licensed to operate in 10 states (six from iAnthus and four from MPX).
"You have all these U.S. companies that need access to capital, and I think the Canadian markets just aren’t going to be deep enough. If you’ve got 10 billion-dollar companies down here all looking for capital and M&A plays, the U.S. is going to have to get involved,” said iAnthus CEO Hadley Ford.
In the short term, however, Canadian investment banks will continue to dominate the financing of U.S.-focused cannabis players. And that means significant earnings potential for banks like GMP and Canaccord.
"You can look at all the big private and public player here in the U.S., the public guys like ourselves, or MedMen or GTI; you can look at the private guys coming public, Nick [Vita] and the Columbia Care guys, Curaleaf, Acreage; you can add up all that market cap and you’re going to get $12-billion or $13-billion,” Mr. Ford said.
“We are all undervalued on any perimeter given the potential we have. If I’m a banker, you go where the growth is. I don’t want to say there’s no growth in Canada, but it’s geometric down here," he said.