If you’re a Canadian investor, the chances are good that you’ve heard or seen a massive spike in interest in medical marijuana.
From pundits to producers and all points in between, interest in the Canadian medical marijuana space has reached frenzied levels, driven there by the new Marihuana for Medical Purposes Regulations (MMPR) announced by Health Canada.
Recent reports peg the number of companies that have applied for licenses from Health Canada to grow and distribute medical grade marijuana at almost 850 with more coming in daily. And while there may only be 13 producers that are licensed to sell or provide medical marihuana under the MMPR today, that number is almost surely expected to rise as those applications work their way through the approval process.
With regulatory, administrative and legal hurdles to the MMPR still remaining, speculators and investors are betting that the entrepreneurs behind many of these firms find a way to stand out and succeed.
From the piece on Supreme Pharmaceuticals, scale appears to be their strategy of choice. With formal final approval under the MMPR still pending, Supreme Pharmaceuticals is nonetheless continuing to work towards its goals of becoming a premier high volume producer in the near term.
On a slightly different note, technology appears to be the strategy employed by Cannabis Technologies. With a view towards finding innovative ways to deploy and deliver medicinal cannabis, Cannabis Technologies has its eye on adopting a pharmaceutical company-like model.
With much of the Canadian medical marijuana industry still in flux, it remains to be seen how the marketplace will react to the sheer number of names and providers focused on the space. On the Canadian Securities Exchange, there are a number of companies in addition to Supreme Pharmaceuticals and Cannabis Technologies that are active in the medical marijuana space.
One thing that does remain clear, however, is that interest from speculative capital is still providing attention and dollars to the medical marijuana story.
Given the stakes involved, the proposed changes are almost certain to generate a spirited debate between those in favour of and those opposed to the amendments to the OPR.
One such point of view came from Jeffrey MacIntosh via the Financial Post. In his recent article, MacIntosh takes aim at the proposed NI 23-101 Trading Rules amendments and provides an insightful analysis about the potential impact they may have on the multi-marketplace model.
While there are other issues as well, OPR appears to be a linchpin, and will therefore be an important topic to continue tracking. If you have thoughts or comments on the proposed amendments to NI 23-101, we’d also love to hear them – feel free to leave a comment below.
2014 continues to be a year of great accomplishments for the Exchange for Entrepreneurs. Earlier this month, the Canadian Securities Exchange (CSE) celebrated the achievement of another key milestone by being named to the OTC Markets Group list of qualified foreign stock exchanges, and in doing so, has opened the door to even greater attention and interest from one of the most popular marketplaces in the US.
Specifically, as a result of this designation, CSE-listed companies are now eligible to apply for trading on the OTCQX and the OTCQB marketplaces. Given the scale and popularity of the OTC marketplaces, the news is certainly creating a buzz among investors and issuers in Canada and the US.
Winds of Change
The approval announcement came just a few days ahead of a visit to Canada by the president and CEO of the OTC Markets Group, Cromwell Coulson.
As part of a campaign to raise awareness about the exchange, Coulson strategically selected Vancouver as the location to talk to industry and media because of the significant concentration of venture-stage companies. Like any savvy investor, however, the timing of Coulson’s visit was just right.
With the passage of the Jumpstart Our Business Startups (JOBS) Act in the US, there have been a number of important barriers lifted for “emerging growth” companies to be able to attract early investors. With restrictions on advertising to certain investors lifted and compelling amounts for capital raising allowed under the JOBS exemptions, there may very well be a catalyst for more active deal making to occur especially for junior and venture stage companies.
A Fine Balance
Given the pace of change that is occurring, however, only companies that can keep up with these changes can truly take advantage of them. One way in which companies can move with greater agility, is in the meeting the regulatory disclosure requirements.
The streamlined continuous disclosure model, recognized by the OTC marketplaces as viable reporting structure, will give CSE listed issuers the opportunity to respond more quickly to emerging funding landscape.
As advocates for reducing complexity, the CSE believes growing companies should be able to focus on growing their businesses and ultimately be more agile in the way in which they run themselves.
The Bottom Line: Being a Qualified Foreign Stock Exchange Opens Doors
The acceptance onto the OTC Market’s list of qualified foreign stock exchanges is a great milestone in a year that has already seen so much positive news and interest in the CSE.
Given the alignment of the CSE’s streamlined approach to cost and complexity, it appears that this could provide emerging growth companies with a strategic edge they need to compete in a quickly changing landscape.
For CSE listed issuers interested in finding out more information about the OTC Marketplaces, here are a couple of resources:
For many in the securities industry, complexity is the new norm. Whether because of technology infrastructure, regulatory compliance or simply keeping pace with innovation, there’s simply just more to manage – everywhere. And, wherever complexity seems to appear, cost seems to show up like a faithful wing-man.
It seems reasonable, therefore, that one promising strategy to lower costs would be to decrease complexity – especially at the trade execution level. At the Canadian Securities Exchange, it is precisely the idea of making the current Canadian securities landscape more efficient that underpins their latest move to simplify access for a key stakeholder in the market ecosystem: the dealer community.
Lower Trade Execution Fees: A Bold Step Forward
As announced in an earlier news release, the CSE is taking a bold step to simplify pricing and access for the dealer community by eliminating the ‘maker/taker’ model and, in its place, implementing equal pricing for both active and passive sides of the trade.
The table below summarizes the new trade execution fee structure as it applies to three tiers of securities trading price. Under this fee structure, both active and passive fees are priced at the same rate on each tier.
This announcement is a win for the dealer community and for the trading public for two important reasons.
First, with better pricing comes improved participation and better functioning marketplaces. Second, by eliminating the maker/taker price distinction, the playing field has been leveled for liquidity provider and liquidity consumer.
Ultimately, however, the change in fee structure is a natural consequence of the need for innovation. According to CSE CEO Richard Carleton:
As the exchange for entrepreneurs, we are committed to bringing innovative solutions to market operations. We understand that by simplifying the moving parts of the market, we’ve not only lowered industry costs but we’ve enabled wider participation and access to trading of junior public companies.
The message of “simpler is better” is gaining traction with many junior public companies. The number of listed issuers on the CSE is up substantially through the first quarter of 2014 and trading volumes are also at historical highs.
While there are still many hurdles to clear, a streamlined and more cost effective framework for dealers is an important step towards making simple the new normal.
The following views and opinions presented in this post are solely those of the author and do not necessarily represent those of CSE – Canadian Securities Exchange.
Love it or hate it, crowdfunding looks like it is here to stay. Although the debate on whether crowdfunding is ultimately beneficial or harmful is still ongoing, it appears that major stakeholders from investor groups to securities regulators are beginning to take the idea of crowd-sourced capital raising seriously.
Fairness is a Two-Way Street
Like most promising ideas, the devil, it seems, is in the details.
The spirit of crowdfunding espouses greater access to investing opportunities by smaller, non-accredited investors. On the other hand, the rules currently in place are designed around curbing widespread participation in “risky” investments.
Striking a balance between investor participation and protection is no easy feat. This balancing act directly impacts industry’s ability to access capital while meeting disclosure requirements.
To be considered as an alternative to current methods of capital raising, crowdfunding needs to be in-line with existing controls on capital raising in a heavily regulated and highly structured capital market infrastructure. After all, the premise is that crowdfunding should increase the ‘fairness’ of market participation. In the spirit of ‘fairness’ however, that should mean that crowdfunding doesn’t undermine the existing regulatory checks and balances put in place to protect both investors and industry.
Exactly how stakeholders will come to some consensus of balancing participation and protection is still being ironed out. One of the voices in the ongoing conversation about crowdfunding in Canada is the well-respected angel investor, Mike Volker.
A Moving Target
In a recent blog post – entitled “Crowdfunding = Going Public“, Volker presents a picture of an evolving capital-raising landscape in which crowdfunding will essentially mirror the existing landscape but in a much more fragmented way.
Volker’s article highlights the key issues confronting crowdfunding and makes several interesting points.
First, it simply is not fair to exclude investors based their economic standing (ie. the 99%), and that fundraising should be more democratic and inclusive of “non-accredited investors”. (Note the recently implemented “Existing Security Holder Exemption” is a step in the right direction).
In addition, Volker challenges the assertion that fraud is the bigger culprit for investors losing money, pointing instead to businesses failures that plague early stage companies. Simply put, the overriding risk that investors must take-on when making an investment in an early-stage company is that the company or idea simply won’t succeed.
Regardless of fairness or risk, the main point Volker highlights is that capital is being left on the sidelines as a result of the current system. Non-accredited investors are being held out of the market, due to regulation, and not able to participate in the high-risk, high-reward investments extended to the “wealthy” 1%.
Letting non-accredited investors participate in earlier stage deals is a key driver behind crowdfunding, but as Volker points out, implementation will be a challenge.
Three points in particular stand out:
Share registration and logistics of shareholder management;
Standardized continuous disclosure, and
Enabling liquidity for investors.
Volker tallies all of the above points and comes to the conclusion that innovations at the stock exchange level, similar to what the CSE has undertaken, could be a good answer to the questions that crowdfunding is trying to answer.
Specifically, with innovation, existing infrastructure can enable companies to efficiently raise growth capital from the public while enabling all investors with adequate, continuous disclosure within a regulatory framework that is fair to all parties involved.
Change is Inevitable
The writing on the wall is clear. There is an appetite by both investors and companies to connect and participate in capital flow in ways that the current system just isn’t providing. Whether this participation need is met by crowdfunding or via existing channels, it is clear that the angels and demons would be better served preparing for change rather than arguing over it.
The March 31st deadline to apply for OSC participation fee relief is just around the corner. As a reminder, earlier this year OSC Staff Notice 13-704 mentioned that certain reporting issuers (class 1 and 3C) and smaller registered companies may be eligible for OSC participation fee relief.
According to the OSC, this initiative was developed as a response to the challenging conditions faced by market participants, specifically those who experienced significant decreases in market capitalization (for reporting issuers) and revenues (for registered companies).
For reporting issuers, the fee relief may range from $160 to $13,350 and for registered firms, the range is projected to be between $235 and $17,725. The notice states that most firms will end up qualifying at the lower end of the range.
To help ensure the application process goes smoothly, it is recommended that supporting documentation be provided on how previous fiscal market cap has been calculated.
The full details on eligibility, documentation and support can be found by clicking on the following link. There is no cost to apply.
The recent interest in marijuana as an investment idea is garnering more than just a little buzz from the investment community and beyond.
As the regulatory landscape around marijuana continues to evolve in the US and here in Canada the conversation has also begun to change. The concerns, it appears, have been shifting away from whether or not it is acceptable to use, and towards understanding circumstances for appropriate use and how best to structure as well as regulate the cultivation, processing, distribution and (of course) taxation.
While some of the conversation on the wave of ‘ganjapreneurs’ is tongue-in-cheek (see Stephen Colbert’s recent view on the matter here), the Canadian conversation is currently focused on how marijuana for medicinal purposes can be made more widely available.
Another recent addition to the CSE listed company roster – Next Gen Metals (CSE:N) – has also identified itself as a participant in the hemp and medical marijuana space having recently created a division to address this market opportunity. Southbridge Resources (CSE:SOU), a CSE listed company, also recently announced that they are making possible inroads into the sector with the potential acquisition of Vodis Innovative Pharmaceuticals Inc.
Without question, the road ahead on marijuana as investment appears to be paved with uncertainties. Nevertheless, entrepreneurs and investors are already at work trying to find where and when ‘budding’ opportunities in the ‘pot-com’ industry are going to present themselves next.
This year’s PDAC was a great opportunity to connect with the mining & exploration industry, government, investors and more. For the Canadian Securities Exchange it was particularly eventful because in addition to having a very busy booth at the Investor’s Exchange, our team was also involved in keynote addresses, panels, networking events (including the parties!) and interviews.
The PDAC has continued to be the conference where mining and exploration companies and investors (big and small) converge to talk about the state of the industry, raise capital and talk about what’s coming next.
With so much going on, there’s no shortage of things to reflect on, however here is a sample of what we got up to at the convention and our thoughts on what the remainder of 2014 holds for the industry.
Our conference swag also brought in curious passers by who were interested in getting their “shine on” with our CSE-branded screen wipes and shoe shiners.
There were lots of exciting conversations, sessions and activities outside of the exhibition hall that we participated in. Here are some of the highlights:
Mining Outlook Luncheon
One of the first big events was the sold-out mining outlook luncheon. Deputy Chairman of the CSE, Ned Goodman, was the keynote speaker at this session and he provided the audience with an entertaining and thoughtful perspective of the current state of the global economy with a particular focus on currency and gold. We’ve pulled together an interesting selection of tweets from folks in the audience at the presentation.
An Exchange with the Exchanges
CSE’s CEO Richard Carleton participated in the panel discussion on the role that stock exchanges can play in assisting mining (and in particular junior mining) and exploration companies in navigating the current capital raising crisis. Joining Richard on the panel was Eddie Grieve of the Australian Stock Exchange, Francis Stenning of Bolsa de Valores de Lima, Peru and John McCoach of the TSX Venture Exchange.
At this event Richard outlined some important points about what exchanges can do and what other stakeholder partners can do in order to help companies adapt to the new market realities. On the exchange side, the CSE is lowering the cash and operational burden for companies to maintain a public listing and making it easier for trading desks to access market data.
Examples of the impact of disclosure policy on companies was also highlighted. The Australian Stock Exchange was shown as an example of an exchange that confronted the issue of regulatory burden and the success and challenges it experienced as a result.
One very interesting point that came up was the idea of regulatory-driven restrictions on the kinds of investments that could be recommended to individuals based on their age. Richard Carleton aptly framed what he found troublesome about this when he pointed out that by restricting the age that certain products could be recommended to individuals, people such as Ned Goodman would be steered away from investing in equities.
Networking Lunch/Make the Switch Seminar
A packed house attended the networking lunch co-sponsored by the CSE, MNP LLP and Chitiz Pathak LLP. Attendees were treated to lunch as well as some food for thought as several CSE-listed companies presented a brief snapshot of their company story. A hats off goes to CSE Senior VP Robert Cook for being able to keep everyone on course during the presentations.
CEO Richard Carleton also provided some brief highlights on the recent performance of the exchange and on the exciting forthcoming developments at the CSE – including further progress with getting more online brokerages to provide online trading and real-time data to their clients.
After the networking lunch, the CSE provided a quick overview of what was involved in transitioning to listing on the CSE, including details on timing and the steps required. For more information on the process, click here.
For those who know Ned Goodman, he is not one to beat around the bush. The electric interview between him and Howard Green of BNN’s Headline was a great snapshot of Ned’s views on gold and on what it takes to successfully run and manage mining companies. Click the following link to access this interview.
The PDAC, especially this year, exemplified the resilient spirit of the mining industry. When faced with adversity, the industry is working creatively to adapt to the current market and the CSE, with its advocacy efforts and solutions for industry partners, is proud to be a part of that solution.
With the number of deals, announcements and meetings that took place at the PDAC, 2014 looks to be an exciting year ahead for the industry and most certainly for the CSE and our partners. We’re grateful for the connections we have made and look forward to building off the positive momentum from PDAC.
In just a few days, the 2014 edition of the PDAC conference will take place. Hundreds of exhibitors and thousands of attendees from all over the world are expected to converge at the Toronto Convention Centre to learn about and discuss the latest trends, thoughts and technologies impacting the mining industry.
Among the dozens of topics that will be discussed in various panels and workshops, one of the burning issues on the minds of many attendees will be the current capital raising climate.
As many readers may already know, the CSE has been actively engaging in the conversation about finding ways to enable junior mining and exploration companies to successfully weather the current capital raising storm.
From the exhibition floor to the podium, the CSE will continue in its efforts to promote innovative and pragmatic solutions for junior mining and exploration companies as well as for the industry as a whole.
Here is a rundown of the events and activities the CSE will be participating in at PDAC 2014:
Mineral Outlook Luncheon, Monday March 3rd
Ned Goodman, Deputy Chairman of the CSE and President & CEO of Dundee Corporation will be the keynote speaker at the (now sold out) Mineral Outlook Luncheon on Monday March 3rd from 12PM-2PM
An Exchange with the Exchanges: The Role of Stock Exchanges in Facilitating Capital-Raising, Tuesday March 4th
CSE CEO Richard Carleton will be a member of a panel of guests representing stock exchanges in Canada, Australia and Peru as part of the session entitled “An Exchange with the Exchanges: The Role of Stock Exchanges in Facilitating Capital-Raising.” This panel will discuss the state of the mineral exploration industry and the role that stock exchanges can play in helping companies navigate the current capital environment. For more information on this session at 10:30AM please click here.
PDAC Investor Lunch & Networking Event, Tuesday March 4th
The CSE is co-sponsoring a lunch and networking event along with MNP LLP, and Chitiz Pathak LLP. This event will feature presentations from CSE-listed companies as well as opportunities for PDAC attendees to network with one another. Click the following link for more details on the PDAC Investor Lunch which is to be held on Tuesday March 4th from 11:30AM to 1PM.
Making the Switch to CSE, Tuesday March 4th
For those interested in learning more about how to make the transition to the CSE, be sure to register for and attend the Making the Switch session on Tuesday, March 4th from 1:15PM-2PM.
In addition to events, the CSE will also be exhibiting at booths 2542 and 2544 where attendees can meet with members of our team as well as talk to representatives from several CSE listed companies.
PDAC 2014 runs from March 2nd to March 5th in Toronto at the Metro Toronto Convention Centre. For more information, including registration information and schedules, you can visit their website at http://www.pdac.ca/convention.
If you are attending, be sure to say hi to our team in person or via Twitter. We look forward to seeing you there!