Canadian market celebrates pot stocks on first day of legal recreational cannabis sales

TORONTO—Trading of cannabis stocks has been a part of life for years on Canada’s major exchange, but Wednesday’s official kickoff of recreational cannabis sales in the country was still a cause for a celebration.

On the day Canada became only the second country to officially legalize adult recreational marijuana use, a group of pot-company executives gathered to ring the opening bell in the Toronto Stock Exchange building. Representatives from Cronos Group Inc. CRON, -7.55%CRON, -6.56% , Horizon’s cannabis ETF HMMJ, -2.10% and Green Organic Dutchman Holdings Ltd. TGODF, +5.44%TGOD, +4.18% attended the gathering, among others.

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The Wednesday gathering was not just a celebration but also an act of validation for an industry that at one point in the not-too-distant past was run by outlaws, smugglers and drug dealers, but is currently transforming into just another sector. Aside from one exception, the bell-ringing room was full of suit-wearing executives with assistants and portfolio mangers of exchange-traded funds that have transformed a black-market business into a multibillion-dollar industry.

“It’s historic what we’ve done here, and we’re proud to be sitting at the center of all this … to facilitate the growth of cannabis companies in Canada,” Loui Anastasopoulos, president of capital formation at TMX, said in remarks Wednesday morning; TMX runs the Toronto Stock Exchange.

Anastasopoulos said the first cannabis company listed in 2014. As of the end of September, there were at least 43 cannabis stocks listed on TMX’s two exchanges with a combined market value of C$46.79 billion, roughly $36 billion. Five years ago, the combined market cap of the sector in Canada was zero.

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“For the first nine months of this year, we’re already ahead of C$2 billion in equity capital raised,” Anastasopoulos said.

The one exception in the room full of suits was Pete Young, master grower at Indiva Ltd. NDVAF, -3.19% , who stood out with dreadlocks and hemp-made apparel and reminisced with MarketWatch about decades of growing pot and illegally delivering the drug to customers on a bicycle. He said though many things have changed in the cannabis industry on the path to legalization, he was not willing to change the way he looked to suit what bankers and investors thought he should dress like.

“I don’t own a suit,” Young said. “No wait, I own one suit and it’s brown corduroy. But I’m not going to wear one here. This is me.”

After a brief toast of orange juice and soda, the assembled executives cheered loudly as they counted down to the market’s open. Weed stocks did not fare well in Wednesday’s trading session, but red ink wasn’t enough to dampen the mood of those assembled after a tremendous run-up ahead of legalization.

The six major pot producers that MarketWatch profiled ahead of legalization traded mostly lower, with Aphria Inc. APH, +3.80% the outlier with a gain of 3.3%. Aurora Cannabis ACBFF, -3.42%ACB, -2.93% fell 3.4%, Tilray Inc. TLRY, -6.40% closed 6.4% lower, Cronos declined 7.6%, Canopy Growth Corp. CGC, -4.38%WEED, -4.28% dropped 4.4%, and GW Pharmaceuticals PLC GWPH, -0.16% dipped 0.2%.

The bell-ringing and beginning of recreational legalization were also a demonstration of the success of regulations in Canada in terms of protecting investors and ensuring companies listed on major exchanges disclose information necessary to making informed decisions, said Michael Kousaie, vice president of strategy for the Toronto Stock Exchange and TSX Venture Exchange.

“When you’re building a sector from scratch, dealing with entirely new issues, dealing with changing federal regulations, dealing with different regulations in different countries, investors look to those key regulatory bodies themselves to establish a framework,” Kousaie said. “The fact that there is credibility put in place by the TSX, by the TSX Venture, by the securities commissions — I think that goes a long way to supporting the growth and success of the business.”

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