Q&A: Canada’s Public Markets Discussed With Director Of Client Listed Services At Canadian Securities Exchange (CSE) Barrington Miller

By Andrew R. Lines, MAI, Principal, CohnReznick

Due to limitations in accessing capital from U.S. banks and public markets, cannabis companies operating in the states continue to explore listing on Canadian exchanges. In fact, U.S. cannabis companies raised about $2.2 billion U.S. dollars on the Canadian Securities Exchange (CSE) in 2018.

To learn more about the option, Andrew Lines, MAI, and a valuation partner at CohnReznick, went to the exchange to interview Barrington Miller, director of Client Listed Services.

Q: Why do companies list in Canada’s public markets?

Miller: The most common reason is to access public capital, primarily for expansion purposes. Canada allows even nascent companies to apply for capital. The CSE recognizes cannabis operators as legitimate businesses, and serves as a viable platform for accessing needed capital. We have a healthy ecosystem to provide capital for startups.

Q: How are companies listing on the exchange?

Miller: Most companies on our exchange do a reverse takeover (RTO) aka reverse merger. U.S. companies usually don’t need to do an RTO, because they are somewhat mature and have an operating history. But surprising to many you don’t need to list on the exchange as an IPO. Most cannabis operating companies that have listed on the CSE have listed as RTOs.

Between an IPO or an RTO, opinion is divided as to which is better. An IPO is perceived to take longer and have higher fees, while an RTO may be deemed as a fast-track solution for distribution and shareholders. With an RTO, there also may be concerns about liabilities connected with companies that are merged, which might prolong the process and reduce shareholder value.

Q: What are the operational metrics that the exchange requires before a business can list?

Miller: You need a minimum of 150 shareholders and sufficient working capital …

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