Curaleaf's Strategic Move To Attract Deeper-Pocketed Investors, Internal Reorganization Sets Stage For TSX Listing

Cannabis giant Curaleaf Holdings, Inc. CURA CURLF will undertake an internal reorganization of its U.S. operations, related to receiving conditional approval from the Toronto Stock Exchange to list the company’s subordinate voting shares on the TSX.

What Happened

The company's wholly-owned subsidiary entered into a subscription agreement with a third-party investor that is not affiliated with the company, Curaleaf USA, or the control person of the company, under which Curaleaf USA issued to the investor one share of Class A voting and non-participating common stock, for an aggregate subscription amount of $1 million.

Details

Before the investment, the company held common stock of Curaleaf USA, representing 100% of the issued and outstanding shares of Curaleaf USA. Concurrently with the closing of the investment and per the seventh amended and restated certificate of incorporation of Curaleaf USA filed immediately before the execution of the subscription agreement, such common stock has been automatically exchanged for 999 shares of class B non-voting and participating common stock.

Following the closing of the Investment by the terms of the subscription agreement, the investor now holds all of the issued and outstanding class A voting stock and voting rights of Curaleaf USA. The company holds all of the issued and outstanding class B non-voting stock, which represents 99.9% of the economic ownership of Curaleaf USA, on an as-converted basis.

The Class B non-voting stock does not provide for voting rights but is exchangeable into shares of class C voting and participating common stock of Curaleaf USA at any time.

Concurrently with the closing of the investment, the company and the investor, as shareholders of Curaleaf USA, also entered into a shareholders’ agreement concerning Curaleaf USA, under which Curaleaf USA holds a call right to repurchase all of the class A voting stock issuable to the investor at any time, and the investor has the right to appoint a director to the Curaleaf USA’s board of directors and a put right exercisable following the occurrence of certain stated events and after the fifth anniversary of the shareholders’ agreement subject to certain parameters to ensure the maintaining of the TSX listing.

See also: These Companies Are Ready To Capitalize On Marijuana Policy Reform In Germany, Here’s Who Could Stand On The Way

Why It Matters

Once the uplisting is fully finalized, Curaleaf will join multi-state operator TerrAscend Corp. TER TRSSF, which is doing business in Canada and the US – and secured a listing on TSX in the summer of 2023. The company run by executive chairman Jason Wild, was the first American cannabis MSO to trade on the Canadian exchange.

Curaleaf’s move means gaining access to deeper-pocketed investors, a possibility hindered due to U.S. federal illegality, which makes the Nasdaq and NYSE nonviable options. Cannabis MSOs like Curaleaf and TerrAscend are currently trading over-the-counter in the U.S.

CURLF Price Action

Curaleaf's shares were trading 0.048% higher at $4.17 per share at the time of this writing on Monday afternoon.

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