September 12, 2017
Written by Laura Molina, Dealogic Research
2017 reaching new high
From its initial limited legalization in 2001, Canadian cannabis ECM has grown to 23 deals priced so far this year for a total of $455m, with 2 further deals in the pipeline. There has been at least one cannabis-related ECM offering announced every month so far this year, with February as the busiest month (6 deals) and April having the highest deal volume ($103m). Issuers come from a range sectors, such as finance and technology, in addition to those focused on medical cannabis.
The largest offering this YTD is from pharmaceutical company MedReLeaf—with its $75m IPO via lead bookrunner GMP Securities, who also led 6 other deals in the industry. A number of other specialist bookrunners have also sprung up. Canaccord Genuity is in the lead with 14 cannabis-related offerings, followed by Dundee with 9 and Clarus Securities with 7.
Legislation sows seeds of change
The sector emerged in 2001 when the Canadian government legalized the sale of medical cannabis to patients from a single government supplier. The law was amended in 2014, allowing legal commercial production of the plants for medical purposes only, with the aim to initiate a competitive market for the industry. The first company to take advantage of this amendment was Tweed, who became the first cannabis company to list on a Canadian exchange via a direct listing that same year. After 2 follow-ons and acquiring several competitors, Tweed became Canopy Growth, a trailblazer in the industry with a current market value of more than $1bn.
Continued buzz from a growing industry
In the 2 years following Canopy Growth’s success, which showed how a formerly niche product could go mainstream, there were 5 cannabis-related ECM offerings on Canadian exchanges (1 deal in 2014 and 4 deals in 2015). They reflected how the market was already adapting to regulatory change.
In 2016, then existing regulation became the Access to Cannabis for Medical Purposes Regulations (ACMPR), which increased the variety of products that could be produced from the plant. As a result, the appetite for cannabis deals took off that year—17 ECM deals priced on Canadian exchanges, raising a total of $313m, with 3 of those supporting M&A deals ($19m). Eventually in 2018, cannabis will be legal for recreational use nationwide in Canada as the industry continues to grow.
Data source: Dealogic, as of September 7, 2017