Canopy Growth Corp. has hit a snag with the Securities and Exchange Commission in its plan to maintain its dual listing on the Nasdaq and the Toronto Stock Exchange when it creates Canopy USA to hold potential ownership positions in U.S. cannabis businesses.
Canopy Growth Corp.
CGC,
said last week the Securities and Exchange Commission said in a letter to the company that it would object to “deconsolidation” of Canopy USA as part of a potential acquisition of edibles maker Wana Brands, Jetty extracts and cannabis company Acreage. It currently holds options to buy the companies, which operate in the U.S.
A spokesperson for the Securities and Exchange Commission declined to comment.
Canopy Growth said it remains in discussions with the SEC as it studies additional structural amendments that would allow the deconsolidation of Canopy USA.
A Canopy Growth spokesperson referred to comments about the effort to analysts on Nov. 9.
“There is more work to be done to enable us to deconsolidate the financials of Canopy USA,” said Canopy Chief Executive David Klein. “Meanwhile, we remain steadfast in our journey ahead.”
Wana, Jetty and Acreage, meanwhile, are demonstrating “impressive growth,” Klein said.
Canopy Growth stock was down 2.3% on Thursday. The stock has fallen 77% in 2023, compared to a 50.8% drop by the Global X Cannabis ETF
POTX.
Canopy Growth first aired its plan to “fast track” its entry into the U.S. market and set up Canopy USA more than a year ago.
It then disclosed that the Nasdaq has objected to Canopy Growth consolidating the financial results of Canopy USA when Canopy USA closes on the acquisition of Wana, Jetty or the fixed shares of Acreage.
Canopy has said it disagrees with the Nasdaq’s objection and that it must consolidate the U.S. company earnings into its financials to comply with U.S. Generally Accepted Accounting Principles.
It remains to be seen what effect a potential re-scheduling of cannabis to a Schedule III substance from its current Schedule I status may have on U.S. stock listings of cannabis companies.
Also read: HHS recommends rescheduling cannabis, and stocks in the sector rally
Since cannabis is currently prohibited under federal law, the New York Stock Exchange and the Nasdaq will not allow stock listings from plant-touching cannabis companies with operations in the U.S.
Canopy Growth’s stock is allowed to trade on the Nasdaq under the symbol CGC because its operations are in Canada, not the U.S.
Some U.S. cannabis companies have set up listings on the Toronto Stock Exchange as well as the Canadian Securities Exchange. These stocks are also traded on the OTC bulletin board, which is accessible to U.S. investors. For the most part, however, U.S.-based institutional investors continue to avoid the stocks.
Also read: Cannabis company Curaleaf applying to move listing to Toronto Stock Exchange in a move to boost visibility
Meanwhile, Canopy Growth has been in cost-cutting mode in the face of headwinds in the Canadian market. It issued a “going concern” warning earlier this year.
Also read: Once-mighty Canopy Growth loses billions as dream of pot riches runs into reality of oversupply and overspending
Also read: Canopy Growth cuts 1,200 jobs in past year and issues ‘going concern’ warning as analyst eyes solvency of cannabis company
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