U.S. pot retailer Curaleaf Holdings Inc. (CSE: CURA.TO) began trading on the Canadian Stock Exchange (CSE) this morning using a Reverse Take Over (RTO) deal structure. Here’s how the company did it.
Curaleaf first raised equity last week via a private placement of subscription receipts. When an investor buys subscription receipts, they get a piece of paper that converts to shares of a company after the deal closes. Curaleaf’s offering size increased by 3 times to CAD $520 million, and as a result their value may be close to $4 billion when the dust settles.
While the previously disclosed offering price range was between CAD $8.56 and $11.47 per subscription receipt, the final price was on the high end at CAD $11.45. The stock is trading down on its debut with a high of $10.79 Canadian dollars.
The border-crossing trend
Like many U.S. pot companies, Curaleaf listed north of its Wakefield, Massachusetts headquarters, on the Canadian Stock Exchange. 49 U.S.-related cannabis companies with are listed on the CSE, out of 106 marijuana issuers. There is a growing trend among both U.S. companies listing on Canadian exchanges, and some of Canada’s biggest cannabis companies are listing on the New York Stock Exchange (NYSE) and the NASDAQ.
Meanwhile, the Curaleaf deal will be among Canada’s biggest-ever reverse takeovers (RTO) ever, and the largest cannabis equity financing so far.
RTO’s are a vehicle that private companies use to go public. In an RTO, a company buys a shell corporation that is already listed on an exchange. Resultingly, the company gets a listing more quickly than a traditional initial public offering. RTO’s are super trendy among U.S. cannabis companies looking to take their companies public.
A successful raise amid the sell-off
The big news for Curaleaf comes as investors sell off the broader marijuana stock sector. Horizons Marijuana Life Sciences Index ETF (TSX: HMMJ.TO), the ETF tracking the largest pot stocks, is down 30 percent from its all-time high. The ETF soared to its highest prices prior to Canadian recreational cannabis legalization October 17th.
Many pot stocks hit their highest trading prices just before recreational marijuana legalization in Canada. Moreover, the industry welcomed a windfall of capital and witnessed several mergers ahead of the historic day. Some are wondering if Curaleaf’s timing is slightly off, while the move could be a way to avoid some of the industries recent volatility.
For more information on investing in the cannabis industry, check out our introduction here.