A Nevada-licensed marijuana producer is breaking ground with a Canadian stock listing that allows it to raise

funds to grow and sell pot in the legally murky U.S. market, likely opening the door for an influx of others.

Friday Night Inc. made its public trading debut Friday on the Canadian Securities Exchange (CSE) and saw its shares spike 467 per cent to close its first day with a market value of $44.2 million, suggesting there is significant investor interest in companies with U.S. state licences to cultivate cannabis.

U.S. marijuana companies are forbidden to list on public stock exchanges in their home country because the drug is considered a Schedule I narcotic at the federal level.

The Obama administration made it clear it would not step in to prosecute operators in states where the drug is legal, but signals from the Trump administration have been harder to read.

That murkiness is causing headaches for Canadian regulators, the country’s major stock exchange and companies that want to invest in U.S. operations.

Vancouver-headquartered Friday Night is the first pure-U.S. play publicly listed in Canada that is directly growing the plant in the U.S. for both medical and recreational use.

“The company’s objective is to capitalize on the opportunities presented as a result of the changing regulatory environment governing the THC and marijuana industry in the United States,” the company said in a June 12 filing.

Canadian marijuana companies have so far tiptoed around the lack of clear cut policies from regulators and the operator of Canada’s largest stock exchange by sticking to the U.S. medical market or ancillary businesses that don’t “touch the plant” and listing their U.S. investments on the less risk-averse CSE.

Even on that smaller exchange, Canadian companies that have U.S. investments, such as Nutritional High International Inc., Canadian Bioceutical Corp. and Golden Leaf Holdings have tried to skate around conflicting U.S. laws by focusing production on oil extracts and edibles, or through indirect investments in subsidiaries or by acquiring real estate and other ancillary businesses.

Richard Carleton, the CSE’s chief executive, said Friday Night’s move will likely be followed by a number of U.S. marijuana producers that have approached the exchange about a potential listings as they eye the huge amounts of capital their Canadian peers have raised.

Securities regulators in Ontario and British Columbia have reviewed and approved prospectuses of companies with interests in the U.S. legal cannabis space, he added.

The CSE, home to startups and entrepreneurs, has benefitted from the TMX’s unofficial hands-off stance when it comes to marijuana companies with exposure to the U.S.

“Companies since the early days of this industry have seen the TSX deeply ambivalent about the space,” he said.

Canadian Bioceutical CEO Scott Boyes said he was told by the TMX Group the company could not complete a U.S. acquisition as long as it was listed on the TSX Venture Exchange even though the deal was structured such that its investment in Arizona’s medical market meant the company was not cultivating or selling cannabis.

“We had no choice, so we had to switch to the CSE,” he said of the company’s January move.

“Until such time as the TMX group changes their policy and makes it a little more open we’ll stay with the CSE.”

Until such time as the TMX group changes their policy and makes it a little more open we’ll stay with the CSE

The CSE believes that as long as an issuer complies with laws in the state in which it operates and adequately discloses the legal risks it faces, the company meets the exchange’s listing standards.

Meanwhile, many Canadian companies say they have been speaking with Canada’s largest exchange operator about its approach and expect it to come out with a written policy guidance.

The TMX Group would not comment on whether such a marijuana policy is forthcoming, saying only that each listing is reviewed on a “case-by-case” basis.

“We evaluate all issuers and their eligibility to list, and to remain listed on our markets, according to our published policies and guidance,” a spokeswoman emailed.

But the problem for many marijuana issuers is there doesn’t seem to be consistency and they don’t know how such policies and guidance apply to the nascent industry.

The Ontario Securities Commission said it is coordinating discussions with provincial securities regulators across the country and also talking to the stock exchanges.

The TMX is feeling pressure to write a clearer policy on U.S. investments because it has sen a number of Canadian companies make investments in the U.S. even as it has prevented U.S. companies from listing, said Cheryl Reicin, an attorney at Torys LLP.

“They really need to figure that out because it’s now blurring.”

Several companies also said they sense a shift toward more liberal policies could be forthcoming at the TMX after it allowed one of Canada’s largest marijuana producers, Aphria Inc., to invest in a Florida-based medical marijuana company through a CSE-listed subsidiary.

Aphria CEO Vic Neufeld said he believes there are ongoing internal TSX discussion about developing a formal policy on U.S. investment, but there has so far been nothing of substance.

“This is an issue they need to conclude on,” Neufeld said.

Steve Hawkins, president at Horizons ETFs, said he approached the TMX  before launching the country’s first marijuana exchange traded fund in March and was told the exchange had a “hard rule” that it would not list any securities carrying on “illegal operations” in the U.S.

“But the Aphria offering was a pretty strong catalyst for us to reopen discussions with the regulators and the TMX,” he said.

Hawkins said as a result of that “minor shift “ in TMX policies, the ETF will open its portfolio to include companies that derive revenue from the medical and recreational industry in the U.S. 

“There can’t be a double standard out there.”

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