Canadian cannabis companies are looking for money, but not every dollar is equal in their eyes. After some exponential growth in the stock market and in private offerings, they’re looking abroad. Most are courting European funds, as Institutions there show interest.
Canopy Growth Corp. (NYSE: CGC), Aurora Cannabis Inc. (OTC: ACBFF) and Tilray Inc. (NASDAQGS: TLRY) have inked export deals with governments across Europe. They’re making inroads by buying local companies, and by spearheading new production in the region.
Companies count on Canadian advantage
Many cannabis companies are on the road, and hoping to sell their products at European conferences. They’re pitching their size and position as the first players in the industry. The goal is to attract more institutional investment, as institutional funds are often more stable and long-term than retail.
Canada, where recreational sales will soon be legal, lead other nations by approving medical marijuana in 2001. Companies there have a hard time attracting ‘smart-money’, however, as American institutional investors have taken a wait-and-see attitude. Their uncertainty surrounds whether pro-reefer regulation will pass everywhere.
Getting Traction in Europe
“Some of the investors who participated in the IPO, they would’ve been unimaginable eight years ago, of course, but a year ago as well,” Brendan Kennedy, president and chief executive of Tilray. Mr. Kennedy met with more than 200 institutions, many in Europe, before that company’s Initial Public Offering. Global investment firm Fidelity International bought around 0.15 percent of Tilray shares.
European institutions bought a third of Canopy’s latest $500 Million financing deal.
The investment tide hasn’t entirely shifted to institutions, but some feel we may be at a turning point for big pot stocks.
More Stable Cash
Stock prices alone would lead you to think these companies don’t need cash. However, retail investment dollars recently drove up share prices. Those dollars come with price fluctuations that make it hard for companies to plan for the future. Legalization is right around the corner, and that will require stable cash flow.
“It’s a smart strategy to … bring in institutions who will be with us as we expand.” Cam Battley, Aurora’s chief commercial officer.
Europe could turn out to be a vital source of funding.