Like several other U.S.-based cannabis producers, Curaleaf Holdings, Inc. (CSE: CURA) chose to undergoing the listing process to have its shares trade on the Canadian Stock Exchange (CSE). The company just began trading recently on Monday, October 29, 2018 and with a valuation of around $4 billion. The company currently operates twenty-eight pot shops and twelve production sites across twelve U.S. states.
Despite marijuana’s illegality in the U.S., the CSE allows Curaleaf, along with other U.S.-based cannabis producers, to list their shares on the exchange. CSE listings don’t receive as much supervision in comparison to the major U.S exchanges or even the Toronto Stock Exchange, or TSX.
Curaleaf CEO Joe Lusardi told MarketWatch during a telephone interview Monday that “we cannot list in the U.S. at the moment, or the TSX, so it was the most logical place to go.”
“Touching the plant” is marijuana industry terminology for firms that are involved in the cultivation of actual pot plants. Curaleaf falls under this category and it has bases in Florida, New York, and Oregon. It operates in states where medicinal cannabis is legal and is attempting to expand into states that have recently legalized weed for adult recreational use, such as California. This shouldn’t be too challenging as Curaleaf can produce 63,000 pounds of dried cannabis flower at its current twelve facilities, per CSE documentation.
Curaleaf has received some comparison to Canopy Growth Corp. (NYSE: CGC) (TSX: WEED), one of Canada’s largest licensed cannabis producers. Both businesses want to control private retail sales and are vertically-integrated. Some rival companies like Aurora Cannabis, Inc. (NYSE: ACB) (TSX: ACB) and Cronos Group, Inc. (NASDAQ: CRON) (TSX: CRON) have taken a different approach to their retail strategies.
Lusardi stated that “there is certainly a conflict between federal and state law. In all of our operations, we operate fully in compliant with state law. In each market that we are in, cannabis doesn’t cross state lines, we operate under the rules. It’s a state-by-state operation.”
Monday’s listing was completed by a reverse takeover when Curaleaf merged with Lead Ventures, Inc., which raised $400 million through a private placement offering. Curaleaf is planning to spend a portion of those funds on acquisitions.
According to the CSE, Curaleaf is strategizing acquisitions in Maryland, Massachusetts, Nevada, and Arizona for a total of roughly $83.5 million. It also plans to spend $80 million on more cultivation plants.
GMP Securities analyst, Robert Fagan, wrote to clients that he is projecting total sales from Curaleaf’s existing facilities to be roughly $491 million. In the fiscal second quarter, Curaleaf grossed $14.6 million with adjusted losses of $10.4 million. One key reason behind Curaleaf’s success is that it grows the marijuana it sells.
Mr. Fagan mentioned that Curaleaf has “emerged as a new industry leader” and is the largest public cannabis company in the United States. He also gave Curaleaf a “buy” rating with a target price of around $20.
Curaleaf sold shares at C$11.45 in its private placement. The stock started trading at C$10 last Monday and closed at C$7.30 that day. Shares of Curaleaf Holdings rebounded throughout the week and ended Friday’s trading at a price of C$10.95.
Disclaimer: The author and Spotlight Growth has no positions in any of the stocks mentioned in this article. Nor does either party currently have any relationship, or any other conflicts of interest, with any of the companies mentioned in this article. This content is meant for informational and entertainment purposes only and should not be meant as a recommendation to buy or sell any securities. Please visit a licensed financial representative to determine what investments are right for you.
Article By: Donald Brewster
