How Canopy is pushing into the U.S. cannabis market while staying onside of TSX rules – The Globe and Mail

An employee tends to marijuana plants at the Aurora Cannabis Inc. facility in Edmonton, Alberta, on Mar. 6, 2018.

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Officially, Canopy Growth Corp. is steering clear of investments in the United States. Over the past year, however, Canada’s largest cannabis company and its affiliates have been quietly securing U.S. exposure through a series of legal manoeuvres that stay onside of Toronto Stock Exchange rules but position Canopy for a rapid move into the U.S. market.

Since October, 2017, TMX Group Ltd., the exchange’s parent, has not let TSX-listed cannabis firms operate in the United States, where marijuana remains federally illegal. That has forced companies to think creatively, spinning off subsidiaries, swapping shares and lining up conditional warrants, which allow them to acquire future positions in U.S. companies.

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One of Canopy’s moves became clear at the end of November when Slang Worldwide Inc., a company run by long-time Canopy allies, filed a preliminary prospectus to list on the Canadian Securities Exchange. Toronto-based Slang is in the process of acquiring a handful of U.S. assets, including Denver-based Organa Brands, owner of several popular vaporizer, edibles and concentrate brands.

What the prospectus shows is that Canopy owns conditional warrants in Slang, giving it the ability to acquire 20 per cent of the company, “following the day that cannabis and cannabis-related products are legalized under applicable federal laws in the United States.”

Exercising these warrants would give Canopy instant exposure to established marijuana-related brands in several U.S. states. (It had previously licensed Organa Brands’ intellectual property for Canada.) More importantly, “what it becomes is shelf space [in U.S. dispensaries], it

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