A decade ago, the idea of marijuana being a mainstream topic and burgeoning legal industry would probably have been laughable. At the time, there were still far more states that hadn't legalized medical pot than there were that had done so, and not a single country around the world allowed recreational cannabis sales.
Today, two countries -- Canada and Uruguay -- allow adult-use weed sales, with more than 40 nations worldwide also supporting some form of medicinal cannabis access. Within the United States, 33 states have given medical pot the OK, with 10 states also passing recreational marijuana legislation. You could rightly say that the cannabis industry has emerged from the shadows.
But it's not just in state legislatures where the cannabis movement is making its presence known. Marijuana has come to Wall Street in a big way, and its presence is now unmistakable.
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These nearly one dozen marijuana stocks now call the NYSE or Nasdaq "home"
Since December 2016, 11 pot stocks have either gone the initial public offering route on a major U.S. exchange -- i.e., the New York Stock Exchange (NYSE) or Nasdaq (NDAQ -0.18%) -- or uplisted from the over-the-counter (OTC) exchange to one of these two well-known exchanges.
Moving to the NYSE or Nasdaq has its advantages, including much-improved visibility and higher volume-based liquidity. That can lead to lower volatility and make it easier for investors to get in or out of mainstream-listed marijuana stocks, should they choose.
Perhaps most important, being listed on a prominent exchange, side by side with time-tested businesses, often encourages Wall Street firms to initiate coverage and/or make an investment. These firms often avoid OTC-listed companies, which means making the jump can have a major impact on how investment-worthy a marijuana stock is viewed by Wall Street.
Here are the 11 pot stocks that now call the NYSE or Nasdaq home, as listed in chronological order by their debut, as well as five surprising facts you may not realize about these prominent marijuana stocks.
- Innovative Industrial Properties (IIPR 2.21%): December 2016, NYSE IPO
- Cronos Group: February 2018, Nasdaq uplisting
- Canopy Growth: May 2018, NYSE uplisting
- Tilray (TLRY): July 2018, Nasdaq IPO
- Aurora Cannabis (ACB 18.15%): October 2018, NYSE uplisting
- Aphria: November 2018, NYSE uplisting
- HEXO: January 2019, NYSE/Arca uplisting
- Village Farms International (VFF 13.22%): February 2019, Nasdaq uplisting
- CannTrust Holdings: February 2019, NYSE uplisting
- Greenlane Holdings: April 2019, Nasdaq IPO
- OrganiGram Holdings: May 2019, Nasdaq uplisting
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1. Innovative Industrial Properties has been around for a while
Although most investors have been focused on the uplisting and IPO push from marijuana stocks since roughly February 2018, what you may not realize is that cannabis real estate investment trust (REIT) Innovative Industrial Properties beat all marijuana stocks to the punch by more than a year. Since IIP, as the company is also known, doesn't directly touch the cannabis plant, its listing was probably overlooked by many investors.
As a cannabis REIT, IIP purchases land and facilities used for growing and processing medical marijuana in the United States. It then leases these assets out for an extended period of time, reaping the rewards of the rental income. Not to mention, it passes along a 3.25% rental increase each year, as well as imposes a 1.5% management fee that's based on the rental rate, thereby providing itself with modest organic growth to accompany its steady dose of property acquisitions.
Currently, Innovative Industrial Properties has 19 properties in its portfolio across 11 states. The average remaining lease on these properties is 15.2 years, with an average annual return on invested capital of 14.8%. Or, in simpler terms, the first pot stock to ever list on a major exchange should see a complete payback on invested capital in less than five years.
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2. Some uplistings have inspired triple-digit gains...
As you might imagine, investors can often bid up a company's share price prior to, and after, making the move from the OTC exchange to either the NYSE or Nasdaq. But you'd struggle to find a pot stock that lifted off quite the way Village Farms International did. Since filing Form 40-F with the Nasdaq in mid-January (i.e., the application to list its common stock on the exchange), shares of the company have more than tripled.
Understandably, uplisting to the Nasdaq doesn't encompass all the reasons Village Farms is up. For instance, advancement of a hemp bill in Texas' legislature is offering hope that the company may soon be able to put 5.7 million square feet of greenhouses to work growing hemp. Hemp is a relatively low-cost plant to produce, but it's an excellent source of cannabidiol (CBD), once extracted. CBD is the nonpsychoactive cannabinoid best known for its perceived medical benefit.
Village Farms has also received a boost following an initial profit from its Pure Sunfarms joint venture with Emerald Health Therapeutics.
But there's little denying that it was one of the furthest pot stocks from being mainstream with the cannabis investing community prior to its uplisting. Moving to the Nasdaq has given it the audience, Wall Street coverage, and volume, needed to be a major cannabis player.
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3. ...While others fell flat
On the other hand, uplisting doesn't give marijuana stocks a free pass to rocket into the stratosphere. Just ask the shareholders of Aurora Cannabis, who endured an absolutely miserable first week of trading on the NYSE. After touching an all-time intraday high on Oct. 16 of $12.52, and closing at $8.69 on the final day of its OTC listing on Oct. 22, Aurora managed to lose 32% in its first week of trading on the NYSE by ending at $5.91 on Oct. 29.
As some degree of solace, Aurora Cannabis has rebounded following its miserable debut. This is, after all, the company that's expected to produce more marijuana than any other Canadian grower. By this time next year, Aurora could be producing as much as 625,000 kilos on an annual run-rate basis. Comparatively, only one other marijuana stock is even expected to yield half as much weed per year as Aurora. When combined with the above-average yield at its largest cultivation facilities, it's clear that Aurora presents favorable competitive advantages.
Yet, even with these advantages, Aurora's share price is pretty much flat seven months after it made its debut on the iconic NYSE.
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4. Tilray is the only grower to IPO on a major exchange
You might also notice that only three of the 11 pot stocks listed on the NYSE or Nasdaq debuted via an initial public offering. Two of these uplistings -- Innovative Industrial Properties and Greenlane -- don't directly come into contact with the cannabis plant. That makes Tilray the only Canadian grower and direct player in the marijuana industry to go the traditional IPO route.
It's hard to argue against the traditional IPO route being a success. Having priced its listing at $17 in mid-July, Tilray's stock would surge to $300 a share on an intraday basis less than two months later. Of course, a strategy shift and numerous quarterly losses later, Tilray has given back nearly all its gains. Nonetheless, it remains the only major marijuana grower to IPO on a reputable U.S. exchange.
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5. Most marijuana stocks don't make the cut
Last, but not least, take note of just how few marijuana stocks are actually able to make the move to the NYSE or Nasdaq.
The reason is simple: Neither the NYSE nor Nasdaq allows companies that deal with marijuana in the United States (since it's a federally illicit substance in the U.S.) to list their shares. Thus, while companies like Aurora Cannabis and Tilray are entering the hemp industry, which is perfectly legal in the U.S., neither company is involved in U.S. cannabis production or sale. As a result, Aurora and Tilray are eligible to list their shares in the U.S. on major exchanges, while multistate cannabis operators in the U.S., like MedMen, Curaleaf, Trulieve Cannabis, and Acreage Holdings, have no chance of uplisting unless the U.S. federal government changes its tune on cannabis.
Additionally, uplisting companies have to meet a laundry list of financial and trading requirements. Most pot stocks, either because of share price, volume, or financial aspects, won't meet these requirements. That makes uplisting by marijuana companies rarer than you might realize.
