Columbia Care, among the largest American multi-state cannabis companies, will make its public market debut on Canada’s NEO Exchange at the start of Monday’s trading session as the index’s first listing with a valuation north of $1-billion. Nicholas Vita, the company’s CEO, spoke to Cannabis Professional ahead of that debut to discuss Columbia Care’s growth plans, the process of working with Canaccord’s special purpose acquisition company (SPAC) for its route to the public markets and how that route will ideally end at a major American stock exchange. The full conversation, lightly edited for length and clarity, is reproduced below.
Cannabis Professional: When did the public listing conversation begin?
Nicholas Vita: At the end of the third quarter of last year we began having that conversation, though we have been having discussions about the market conditions at the board level for some time, and effectively the board made a decision. The board decided to go public during the week of Oct. 14, we announced it on a Wednesday and then we had raised all the money by Thursday. We actually went up to Toronto and presented at the Canaccord conference and raised about a quarter of a billion dollars over twelve hours, so it was an incredibly efficient process. We were very focused that it worked out the way it did.
CP: And how did you come about working with Canaccord’s SPAC specifically?
NV: We had gone through a fairly exhaustive review of all the alternatives, including a traditional IPO, an RTO structure and then this SPAC. Ultimately we looked at this and thought about it in a very simplistic way: Canaccord is the axe in terms of trading markets and understanding both the Canadian and U.S. cannabis companies and capital market environments. This was an incredibly efficient way to approach the marketplace. We went through the fundraising route without having to go through an exhaustive marketing period and what was really important was that we were able to list on the NEO.
CP: Right, and you’ll be the first listing on that exchange with a valuation north of a billion dollars, why go that route instead of another index like perhaps the Canadian Securities Exchange as the CSE is the home of the vast majority of publicly-listed American cannabis companies?
NV: The NEO was really a good step for us because it is considered a senior exchange and has all the listing requirements that the U.S. major exchanges have, so having fully audited IFRS and U.S.-GAAP Financials before we began trading was really important to us to make sure we went through the credentialization process to make sure we attract the most important and sophisticated investors. That was one of the reasons we went through this process to begin with. Especially in a market where there is so much potential for M&A activity, we wanted to make sure that everyone knew what our starting point was just from a financial perspective.
CP: You’re not worried about liquidity issues, or is part of the plan to be in a position to also list on a major American exchange once you’re legally allowed to do so?
NV: The two cannabis indices that just came out, one of which is focused on the U.S. multi-state operators, are both listed on NEO so it is actually a really synergistic environment for us to be listed on, and what I really like about it is that it is not just a cannabis index. It has a variety of other industries represented and it is really growing very quickly. As part of our capital markets strategy, we will have a U.S. and a European listing as well alongside the NEO, so we will be trading on the OTC market in the U.S. to make sure that as the company grows and liquidity grows we have a balanced view from the capital markets space, but longer term we definitely do want to access the U.S. markets because ultimately we are a U.S. domiciled entity for all intents and purposes. We built the company with the expectation that at some point we would have a dual listing so everything we can do to prepare for the conversations that we would like to have two or three steps down the road is part and parcel about how we think about growing our business.
CP: On the SPAC, they have been around a long time in the U.S. but are relatively new in Canada and the ones here have a bit of a mixed track record of success, has that ever been a cause for concern for you or the Columbia board?
NV: Well, when you think about it, the industry that we’re in really didn’t exist six years ago. Our company is one of the oldest cannabis companies in the United States and we were the first to develop a multi-state strategy so I think that our risk tolerance is probably higher than most. But in this case I actually feel very good about the SPAC because it came through Canaccord which is a known entity in the industry and in Canada and in global capital markets and ultimately people are going to measure the performance of the SPAC based on the performance of the company, and that is within our control so we extremely enthusiastic about the future. We saw this as an opportunity to offer the markets a level of transparency that we couldn’t when we were private and it also frankly reduces our cost of capital and gives us a currently which gives us the ability to play in the M&A market more aggressively if that is what we choose to do.
CP: What is the M&A strategy then, will it change after you’re officially public?
NV: It is something we have always looked at, but one of the things that makes us unique is we have always had an organically built business, but I think we have the critical mass and scale now that we can begin to actually lean into certain markets and certain expansion strategy using our currently [read: stock] as a facilitator for those approaches… Having a currency opens the door for us to begin having very broad-based conversations that are easy to transact, much more so than if we were still a private company.
CP: You said you expect to list on a major American exchange at some point, do you believe the SAFE Act currently before Congress, should it become law, will make that possible?
NV: It opens the door for so many different strategic and tactical conversations. It eliminates the banking issues, the insurance issues, both of which we pay an unusually high premium to access. It should give us access to capital markets, which means we can begin to have an earnest dialogue with the major indices not only in the U.S. but globally. It also normalizes and de-stigmatized the broad based industry so for those that have built companies that can withstand the test of time and build innovation into their business models, I think those entities will disproportionately benefit from something like this and you’ll begin to see a bifurcation in the marketplace.
CP: What kind of timeline do you envision there? If the SAFE Act were to become law tomorrow, how quickly could you potentially list on the NYSE or NASDAQ?
NV: That is a question I wish I knew the answer to, I think there is very important dynamic that we have been very sensitive to. Although we live and breathe the industry and we are in it every day, [cannabis businesses are] not necessarily something that you see every day unless you are in the industry yourself. Our job is to build an organization that some of these blue chip institutions can actually embrace. That takes a lot of time and confidence and transparency to establish that type of relationship where they are sure you are never going to diminish their reputation, because opening that door for us really gives us an enormous advantage. When you see what [market access] has done for the Canadian companies, you can only imagine what it will do for the U.S. companies. It is a really, really huge opportunity but it is going to take time to prove to this quasi-governmental agencies that we are worth the risk and worth the time and worth the trust.
Jameson Berkow