The marijuana industry is evolving at a breakneck pace. What had once been an industry that was forced into seclusion is now an industry that has a product that's considered mainstream throughout much of North America and Europe. Not to mention, more and more people favor the idea of legalizing cannabis, at least in the United States.
Brand-name marijuana stocks are making the move to the NYSE or Nasdaq
As the marijuana industry has flowered, select pot stocks have taken the opportunity to make the move from the under-the-radar over-the-counter (OTC) exchange to either the New York Stock Exchange (NYSE) or Nasdaq. Since December 2016, a total of nine marijuana stocks have debuted on the NYSE or Nasdaq, with two going the initial public offering route, and seven uplisting from the OTC exchange.
Why uplist? The most obvious reason is that it improves the validity and visibility of a stock. By listing a marijuana stock's shares side by side with time-tested businesses, the cannabis industry is proving that it's not just a flash in the pan. It also doesn't hurt that volume-based liquidity tends to be dramatically improved by listing on the NYSE or Nasdaq, which can help reduce volatility and tighten up the bid and ask, should you want to buy into or sell out of the cannabis craze.
Of course, keep in mind that not all pot stocks have the option of uplisting. There is a laundry list of financial requirements when listing on the NYSE or Nasdaq that quite a many pot stocks wouldn't meet. Further, cannabis companies that operate in the U.S. aren't allowed to list their shares on these reputable U.S. exchanges -- at least until the federal government changes its tune on marijuana. That excludes multiple billion-dollar market cap companies in the vertically integrated dispensary industry.
But, as announced two weeks ago, the U.S. exchanges are about to get their 10th pot stock.
This popular pot stock is headed to the Nasdaq
On April 26, one of the only remaining major pot stocks -- i.e., a grower producing more than 100,000 kilos a year -- to trade on the OTC exchange announced its plans to move to one of the United States' reputable stock exchanges. Ladies and gentlemen, after a long wait, OrganiGram Holdings (OGI -0.25%) has filed initial paperwork to list its shares on the Nasdaq.
OrganiGram is the only major pot grower to be based in the Atlantic, with the company's only grow site in Moncton, New Brunswick. Currently working on a phase 4 expansion that'll take up the entire calendar year, OrganiGram expects to eventually have around 490,000 square feet of growing space at its disposal.
While this probably doesn't sound like a lot (and it isn't, based solely on square footage), the company is maximizing the usage of its space by stacking its grow farm three tiers high. In doing so, OrganiGram expects to achieve yields of better than 230 grams per square foot, which is well over double the industry average of closer to 100 grams per square foot. In aggregate, OrganiGram can produce 113,000 kilos a year, which may be good enough for a top 10 spot among Canadian growers.
Aside from production efficiencies, OrganiGram can also lean on its geographic advantages. Although eastern Canadian provinces (i.e., New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador) are lesser populated than other provinces, the National Cannabis Survey in Canada from the fourth quarter showed that adults in these Atlantic-based provinces use marijuana more frequently than consumers throughout other Canadian provinces and territories. This situates OrganiGram at the heart of Canada's demand.
This is also a company that recently announced its intention to refurbish 56,000 square feet at its Moncton campus, some of which will be used for additional extraction capacity. Since derivatives products, such as oils, offer considerably better margins than traditional dried cannabis, OrganiGram wants to ensure it has a broad enough portfolio to take advantage of this rise in derivatives.
Suffice it to say, I expect its uplisting to be received well by investors, and I wouldn't be in the least surprised if OrganiGram is one of the first pot stocks to be profitable on an operating basis, sans the assistance of fair-value adjustments.
This marijuana stock should be next
The big question then becomes: Which pot stock is next to uplist after OrganiGram?
With the vertically integrated dispensary operators barred from doing so given their involvement in the U.S. cannabis industry, and moderately sized growers like Aleafia Health and Auxly Cannabis Group failing to meet the minimum share price requirement, there's only one logical marijuana stock that should be making the move next: Charlotte's Web Holdings (CWBHF -0.54%).
Charlotte's Web is a leading hemp producer that's responsible for retailing a line of hemp-based oil and cannabidiol (CBD) products in more than 4,000 retail locations. Already seeing an incredible uptick in CBD usage in the U.S. -- CBD is the nonpsychoactive cannabinoid best known for its perceived medical benefits -- Charlotte's Web is expecting to receive a healthy bump in sales and profitability following the signing of the farm bill into law in December. The farm bill legalized hemp production and hemp-derived CBD, literally opening new retail doors to the company's products. More importantly, with hemp production now legal, nothing stands in the way of Charlotte's Web listing its stock on a major U.S. exchange.
Charlotte's Web absolutely checks all of the boxes needed for uplisting to a major U.S. exchange, including market cap, volume, and liquidity. And it certainly doesn't hurt that it's one of only a select few marijuana stocks to be profitable on an operating basis, without the assistance of one-time benefits or fair-value adjustments. Don't be shocked if Charlotte's Web follows OrganiGram's lead.