Many institutions and individuals interested in marijuana investing have stayed on the sidelines because their investment options have been mostly limited to high-risk penny stocks that trade on unregulated over the counter markets.

This pent-up demand, however, has begun to be unleashed.

In May, Canopy Growth (NYSE:CGC) listed its shares on the New York Stock Exchange, and in July, Tilray (NASDAQ:TLRY) held its initial public offering on the Nasdaq. Soon, those two companies may be joined on the major U.S. exchanges by Aurora Cannabis (NYSE:ACB), one of Canada's biggest marijuana companies. Is Aurora Cannabis worth buying now?

First, a pot primer

The United Nations pegs the global marijuana market at $150 billion annually, and increasingly, that market is being moved out of the shadows by laws establishing regulated marijuana marketplaces.

A man in a shirt and tie sitting in a yoga pose as money falls down around him.

Image source: Getty Images.

Marijuana remains a Schedule I controlled substance in the United States, but that hasn't stopped individual states from passing pro-pot laws. So far, 31 states have passed laws supporting medical marijuana sales and nine states, including California -- the nation's most populous state -- have passed recreational marijuana laws.

Despite the growing embrace of marijuana laws in the U.S., the country's cannabis market remains fragmented and hamstrung because of federal rules that create obstacles to doing business across state lines, deducting common business expenses on tax returns, and accessing traditional banking services.

The challenges facing the U.S. marijuana industry have led many investors to focus on Canada, where a national medical marijuana market has been up and running since 2014.

Canada's successful medical marijuana market has provided a blueprint for other countries to use, including Germany, and it's contributed to Canada's passing laws establishing a nationwide marketplace that's set to open next month. According to Deloitte, Canada's legal marijuana sales could total as much as $6.1 billion in 2019, with medical marijuana accounting for only between $770 million to $1.79 billion.

Deloitte's forecast may only hint at the long-term market opportunity for marijuana, though. According to beer, wine, and spirits Goliath Constellation Brands (NYSE:STZ), Canada's marijuana market could be worth $11 billion and the global marijuana market could be worth over $200 billion in 15 years.

Why list in the United States?

According to Matt Karnes at GreenWave Advisors:

The benefits of listing on a U.S. Exchange by a Canadian LP (or other marijuana company) is that it provides currency for acquisitions and alternatively, could facilitate investment into the listing company. Listing on a major U.S. exchange will also facilitate investment by institutions that would not otherwise be able to deploy capital into the sector.

In short, listing on a major U.S. exchange unlocks pent-up demand from U.S. investors, driving share prices higher, and thus providing marijuana companies with an alternative to cash and debt for mergers and acquisitions. It also provides large equity owners of these marijuana companies the greatest opportunity possible to sell their shares at favorable prices.

The benefits associated with listing in the U.S. are evidenced by Canopy Growth and Tilray's experiences. Since listing on the New York Stock Exchange in May, Canopy Growth's shares have more than doubled, and since IPO'ing on the Nasdaq at $17 in July, Tilray's shares are up over 600%.

Canopy's increasing share price may have contributed to Constellation Brands willingness to pay $4 billion this summer to acquire a 38% ownership stake, meanwhile, Tilray's successful IPO has provided it with a cash stock pile that it's using to increase its production capacity ahead of Canada's recreational market opening in October.

Since listing on the New York Stock Exchange, Canopy Growth has used shares to purchase Highlands for $29 million to enter the African market, successfully completed a $600 million Canadian dollars convertible senior notes offering that can be converted into shares at C$48.18, acquired the 33% it didn't own in BC Tweed for C$374 million in shares, made about C$100 million in Latin American acquisitions, used shares to acquire Canadian competitor Hiku, and used shares to acquire Canopy Health Innovations (a marijuana health company). I'm not saying these deals couldn't have happened otherwise, but the added liquidity and strength in shares following its U.S. listing likely didn't hurt.

A marijuana leaf rests on top of a $100 bill.

Image source: Getty Images.

Aurora Cannabis: taking the leap

One of Canada's biggest marijuana companies, Aurora Cannabis was an early player in Canada's medical cannabis market, and as a result, it's become one of Canada's leading marijuana producers.

According to reports, it plans to follow in Canopy Growth and Tilray's footsteps and list itself in the U.S. on a major stock exchange as soon as October. Given the size of Aurora Cannabis' footprint and its financials, and Canopy Growth and Tilray's success, a good argument can be made that investors will flock to the stock once it begins trading in America.

Aurora Cannabis has funded marijuana production capacity of over 500,000 kilograms per year and in its fiscal third quarter, revenue was C$16.1 million. Of that, cannabis product sales were $10.8 million, up 149% year over year because of organic growth and revenue from acquisitions, including CanniMed.

For perspective, Canopy Growth's estimated 500,000 kilograms of production capacity translated into quarterly sales of C$25.9 million last quarter (up from $15.9 million the year prior), and Tilray's roughly 75,000 kilograms in capacity produced $9.7 million in sales last quarter, up from $5 million last year.

Is Aurora Cannabis a buy?

If Canopy Growth and Tilray's performances are any indication, demand for Aurora Cannabis shares following a U.S. listing could be significant. After all, it is one of the biggest marijuana companies, and, like Canopy Growth and Tilray, it's eyeing market share worldwide, not just in Canada.

It's not a cheap stock, though. Its $8.8 billion market cap is lower than Canopy Growth and Tilray's, but it's still about 200 times annualized quarterly product sales. A valuation that rich likely bakes in a lot of growth. It may also bake in some of the value that could be associated with an equity deal like the one Constellation Brands inked with Canopy Growth this summer.

As a refresher, Constellation Brands spent over $4 billion for 38% of Canopy Growth and it can pay an additional $3.4 billion to increase its stake above 50%. That deal implies Canopy Growth's entire business is worth north of 10 figures.  

Overall, the long-term prospects for marijuana are massive. If Constellation Brands forecast for $200 billion-plus in 15 years is right, then paying up now to acquire shares in top stocks could pay off, but there's no guarantee and it's likely there will be tremendous volatility in share prices between now and then.

Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.