Banking, intellectual property, food and beverage (and cosmetics), international trade, domestic trade, state laws, ag production contracts, etc., etc. When it comes to industrial hemp, the 2018 Farm Bill upended all of these things. Our cannabis business lawyers have been busy advising a large number of new hemp and hemp-CBD businesses getting in on the fray, as well as some large and well-established companies exploring options in the space. All told, the amount of private capital flowing into hemp and hemp-CBD is extraordinary. And public money is on the way.
Prior to federal legalization of hemp last December, a few pioneering hemp companies had gone public. These companies acquired listings on secondary Canadian exchanges like the CSE, which is an alternative stock exchange with simplified reporting requirements and reduced barriers to listing. That exchange takes U.S. marijuana companies, too, and there are quite a few of them these days. The CSE caters to micro cap and emerging companies and it does not have the restrictive policies of the old-guard TSX or TSXV which is the primary Canadian exchange (and the eighth largest in the world, by market cap). Unlike the CSE, the TSX / TSXV do not allow for the listing of companies invested in activities which violate U.S. law with respect to cannabis.
Still, a lot of companies would like to be listed on the TSX / TSXV. While the listing requirements are intensive by comparison, issuer opportunities are more expansive on everything from international institutional investment to specialized indices to overall visibility. Given all of that, it was interesting last month when we got word from a multi-national Canadian law firm we work with that TMX Group had advised its lawyers that the TSX / TSXV is open to the listing of US hemp and CBD Issuers that operate in states where such operations are legal.
The TSX / TSXV is apparently taking the position that this is not a change in policy, as an issuer must still satisfy the exchange that the issuer complies with all applicable laws in the jurisdictions in which it operates. However, the Exchange is now generally satisfied that Hemp / CBD activities are now legal in the US at the federal level in light of the 2018 Farm Bill. It seems unlikely that the TSX / TSXV will issue a formal notice on this development (given its position that it has not changed its policy), but we think the exchange got it right this time.
So what does this mean for U.S. hemp companies? More possibilities. More reach. More access to institutional capital. More legitimacy. More visibility. We may also start seeing certain companies divest themselves from marijuana entirely in favor of hemp, and we may see a rash of uplisting in the near future. As far as major U.S. exchanges, like the NYSE and Nasdaq, we may see some northern influence with respect to those exchanges’ policies on the acceptance of hemp-only and CBD-only listings. To date, those exchanges have only agreed to list Canadian cannabis producers, but with native companies like Walgreens moving into the CBD space, it’s only a matter of time until we see a U.S. hemp-co listing.
The U.S. exchanges should be put to a decision very soon, but for now the TSX / TSXV joins the CSE as wide open for U.S. hemp and CBD companies operating as per the 2018 Farm Bill.