With the listing of billion-dollar U.S. cannabis company Columbia Care Inc. (NEO: CCHW), Canada’s lesser-known Aequitas NEO Exchange has been cast into the limelight.
Columbia Care, the largest fully-integrated multi-state medical cannabis operator in the U.S., officially began trading on the Aequitas NEO Exchange on April 29, 2019 after being acquired by Canaccord Genuity Growth Corp.
Columbia Care opened at $11.60 and closed at $10.90 for its first day of trading, closing slightly lower at $9.40 today.
“Columbia Care Inc. . . . has operations in 14 U.S. states and territories plus Malta . . . The company [listed] via an acquisition by Canaccord Genuity Growth Corp., a special purpose acquisition company, or SPAC, with a valuation of about $1.4 billion.”
Canaccord’s special purpose acquisition company, Cannabis Strategies Acquisition Corp, listed on the Aequitas NEO Exchange itself back in 2018, raising a total of $46 million in its initial public offering.
Canaccord’s acquisition ambitions seem far from finished. The Canadian investment bank recently completed another initial public offering of $100 million for its newest SPAC, Canaccord Genuity Growth II Corp. Canaccord Genuity Growth II Corp. began trading on the Aequitas NEO Exchange under the symbol CGGZ.UN. on April 5, 2019.
But it’s not just Canaccord gravitating towards the NEO Exchange.
Sponsored by U.S. family office Mercer Park, Mercer Park Brand Acquisition Corp. is another cannabis-focused SPAC with plans to list on the Aequitas NEO Exchange. Mercer Park previously raised US$125 million for its first NEO-listed SPAC, Cannabis Strategies Acquisition Corp, back in 2017. This time, it’s targeting a monstrous US$250 million for Mercer Park Brand’s IPO.
What Is The Aequitas NEO Exchange?
Owned by Aequitas Innovations (a company backed by Mackenzie Investments, Royal Bank of Canada, and more), the Aequitas NEO Exchange has been around since mid-2015. According to Aequitas NEO, the NEO is responsible for roughly 10% of all volume traded in Canadian-listed securities.
Aside from its stringent listing requirements, NEO’s biggest differentiator from exchanges like the CSE is its stance against publicly traded exchanges.
” . . . many stock exchanges have become publicly-traded companies themselves. They belong to shareholders. And just like any other company, they are designed to turn a profit.
Decisions made to improve profitability can compromise decisions that should be made in the public interest . . . In this quest for profit, they enabled predatory trading practices which have changed the nature of capital markets around the world, creating a disadvantage for long-term investors, and removing millions of dollars in equity from the markets every day.”
To further separate itself from the pack, NEO provides a variety of benefits for NEO-listed securities, including free real-time market data, built-in market making services, countermeasures against predatory high-frequency traders, and more.
Aequitas NEO Exchange vs Canadian Securities Exchange
So with all this said, can NEO really compete with the CSE?
That remains to be seen. While NEO’s comparatively strict listing requirements may appeal to larger companies (especially U.S. cannabis companies like Columbia Care), it does so at the expense of alienating smaller, potentially higher growth companies.
These risky but occasionally lucrative opportunities are exactly what made the CSE so popular to begin with. The CSE boasts 160 marijuana listings, while the NEO has only 5. As such, it will likely take more than a single billion-dollar cannabis listing for the NEO to ‘rival’ the CSE.
Regardless, competition amongst the different exchanges could be a good thing for investors (who wouldn’t want free real-time market data?), so long as it doesn’t lead to a fragmented investment environment.