Marijuana stocks: US companies say Canada is leaving them in the dust

A marijuana dispensary shows off its
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• The largest publicly traded marijuana companies — even
  when listed on American exchanges like NYSE — are completely
  forbidden from operating in the US. 
• This means the entire American marijuana sector is
  missing out on hundreds of billions of dollars of investments
  that are instead going to Canadian firms. 
• 
  Terra Tech CEO Derek Peterson has a plan to change this,
  and it starts with a full-page ad titled “Dear Mr. President,”
  which is slated to run in the Wall Street Journal next week
  along with ad slots on “Fox and Friends.”

Marijuana stocks are booming this year.

A handful of Canadian cannabis companies have successfully raised
billions on American stock exchanges like the  New York
Stock Exchange and Nasdaq, but thanks to federal laws that forbid
them from operating in the US, every cent of that capital is
heading north of the border.

Legally-operating US marijuana companies — in places like
Colorado where the drug is legal, at least on a state level —
have largely missed out on the success stories of their Canadian
peers due to federal drug laws that stand between their equity
and a listing on a major exchange. Derek Peterson, CEO of
California-based Terra
Tech, says American companies are being left in the dust.

“The problem that we’re under as US operators is these Canadian
companies are using the healthy capital market up there to fund
and raise a ton of capital, putting us at serious risk,” the
former investment banker, who has helmed Terra Tech for nearly
seven years, said in an interview. “We’ll end up being take out
candidates for probably great premiums for our shareholders, but
the concern is about longevity.”

It’s a problem that’s sending major investments— like
Constellation Brands’ $4 billion stake in Canopy Growth
Corporation — outside of the US. Elsewhere, companies like

Green Growth Brands, are pursuing unusual methods like reverse
takeovers in order to list on Canadian exchanges and
cash in on the trend. 

“It’d be foolish to sit on the sidelines and use our own
cash to grow our business,” Green Growth Brands CEO Peter
Horvath, a veteran of American Eagle, DSW, and Victoria’s Secret,

told Business Insider. “You’ve got to skate to where the
puck is going, not where it is.”

Terra Tech and Peterson refuse to stay idle and let American
companies get left behind. 

In an effort to speed up the modernization laws in the US, Terra
Tech plans to take out a full-page ad in the Wall Street Journal,
aimed directly at President Donald Trump, as soon as next week.
Peterson also plans to buy advertising slots during Fox and
Friends,
the morning talk show that’s known to be a favorite of the
president.

“If we don’t change our laws here and the banks don’t have a
chance to come in and fund companies and have access to out
capital markets, we’re going to end up having our industry owned
by Canadian conglomerates,” Peterson said.

“We would prefer to create our own destiny and have access to the
Morgan Stanley’s, Bank of Americas, and Goldman Sachs’s of the
world to be able to raise real capital and compete in the global
marketplace.”

Until then, most major Wall Street banks will likely stay on the
margins. No major sell-side research department except for Cowen
has launched coverage of marijuana stocks, despite the largest
ones being worth more than many of the other equities they cover.

Canopy Growth, for example, is easily the most valuable publicly
traded cannabis company with a market cap of $14 billion, more
than double that of the sports-apparel maker Under Armour — and
is only covered by two US research shops: Cowen and William
O’Neil. 

“We’re working to at least get a public conversation going around
this because I don’t think a lot of our political leaders
understand what’s happening here from a capital markets
perspective,” Peterson said.

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