TORONTO—Trading of cannabis stocks has been a part of life for years on Canada’s major exchange, but Wednesday morning’s official kickoff of recreational cannabis sales in the country was still a cause for a celebration.
On the day Canada became only the second country to officially legalize adult recreational marijuana use, a group of pot-company executives gathered to ring the opening bell in the Toronto Stock Exchange building. Representatives from Cronos Group Inc. CRON, -6.34% CRON, -6.30% , Horizon's cannabis ETF HMMJ, -2.01% and Green Organic Dutchman Holdings Ltd. TGODF, +2.96% TGOD, +3.09% attended the gathering, among others.
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The Wednesday gathering was not just a celebration but also an act of validation for an industry that at one point in the not-too-distant past was run by outlaws, smugglers and drug dealers, but is currently transforming into just another sector. Aside from one exception, the bell-ringing room was full of suit-wearing executives with assistants and portfolio mangers of exchange-traded funds that have transformed a black-market business into a multibillion-dollar industry.
“It’s historic what we’ve done here, and we’re proud to be sitting at the center of all this … to facilitate the growth of cannabis companies in Canada,” Loui Anastasopoulos, president of capital formation at TMX, said in remarks Wednesday morning; TMX runs the Toronto Stock Exchange.
Anastasopoulos said the first cannabis company listed in 2014. As of the end of September, there were at least 43 cannabis stocks listed on TMX’s two exchanges with a combined market value of C$46.79 billion, roughly $36 billion. Five years ago, the combined market cap of the sector in Canada was zero.
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“For the first nine months of this year, we’re already ahead of C$2 billion in equity capital raised,” Anastasopoulos said.
After a brief toast of orange juice and soda, the assembled executives cheered loudly as they counted down to the market’s open. Weed stocks did not fare well in Wednesday’s trading session, but red ink wasn’t enough to dampen the mood of those assembled after a tremendous run-up ahead of legalization.
The six major pot producers that MarketWatch profiled ahead of legalization were mostly trading lower Wednesday, with Aphria Inc. APH, +4.55% the outlier with a gain of about 4%. Aurora Cannabis ACBFF, -1.89% ACB, -1.36% was more than 1% lower, Tilray Inc. TLRY, -6.55% and Cronos were off by more than 6%, Canopy Growth Corp. CGC, -3.96% WEED, -4.16% dropped about 4%, and GW Pharmaceuticals PLC GWPH, -0.40% dipped less than 1% in late-afternoon trading.
The bell-ringing and beginning of recreational legalization were also a demonstration of the success of regulations in Canada in terms of protecting investors and ensuring companies listed on major exchanges disclose information necessary to making informed decisions, said Michael Kousaie, vice president of strategy for the Toronto Stock Exchange and TSX Venture Exchange.
“When you’re building a sector from scratch, dealing with entirely new issues, dealing with changing federal regulations, dealing with different regulations in different countries, investors look to those key regulatory bodies themselves to establish a framework,” Kousaie said. “The fact that there is credibility put in place by the TSX, by the TSX Venture, by the securities commissions — I think that goes a long way to supporting the growth and success of the business.”
