Can The TSX Save The Cannabis Industry? What TerrAscend's Listing Could Mean

The pivotal day was July 4. The fireworks weren't only for the U.S. Independence Day celebrations but also for a significant event in the world of cannabis. TerrAscend TSNDF TSND, a multi-state operator (MSO) doing business in Canada and the U.S., carved a new niche in cannabis history by securing a listing on the Toronto Stock Exchange (TSX), a coveted milestone for any company in the industry.

This development is a beacon in the cannabis landscape for a variety of reasons, as documented in Jeremy Berke's "Cultivated" newsletter. The quest to "up-list" onto a major exchange has been a long-held dream for every company involved in the cultivation or sale of cannabis in the U.S. The appeal lies in the access to deeper-pocketed investors, a possibility previously hindered due to federal illegality which makes the Nasdaq and NYSE nonviable options.

So, why is this a game-changer?

Currently, TerrAscend and other MSOs are resigned to trading over-the-counter in the U.S., while also navigating the secondary Canadian Securities Exchange. These platforms are far less liquid compared to the TSX, curbing the potential to tap into a broader financial network, explains Berke. Moreover, heavyweight institutional investors, such as large pension funds or asset managers, have shied away from U.S. cannabis companies as if they were an outstretched ten-foot pole.

However, the TSX listing could, theoretically, shift this paradigm. It introduces a trifecta of benefits - credibility, liquidity, and an additional layer of security for major investment banks and custodians to engage with the industry. "It doesn't mean they'll come rushing, but it will surely help," Berke suggests. Evidence of this positive shift was seen when TerrAscend's executive chairman, Jason Wild, revealed via a tweet that Morgan Stanley removed all restrictions from the stock.

It's essential, though, to navigate this news with a balanced perspective. TerrAscend's deal structure is intricate and not easily replicable. The TSX listing might not be the silver bullet for the challenges afflicting the cannabis industry, but it does crack the door open. As Berke rightly anticipates, "expect a flood of companies to follow TerrAscend’s footsteps if this works out."

This is a story from Jeremy Berke's "Cultivated" newsletter. Subscribe now so you don't miss the next one.

Photo by Hermes Rivera on Unsplash

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