VIDEO: Canopy Growth Corp CEO Bruce Linton Talks NYSE Listing pt.1

James West: Hey, welcome back to Midas Letter Live. My guest this segment is the rather famous and just a little bit late, Bruce Linton.

Bruce, come on in here. This is live T.V. We don’t stand on ceremony here. Bruce Linton: I like to think of myself as the late Bruce Linton.
(Laughter) The late Bruce Linton.
Bruce Linton: The late Bruce Linton… and it’s not good (Laughter)

James West: (Laughter) That is too soon for that. Too soon for that. So, you’re busy?

Bruce Linton: It’s good man, it’s good.

James West: Yeah, yeah it’s all good. You’re on fire lately. You guys have lit up the whole cannabis complex in Canada again with your New York Stock Exchange listing. Let’s start there. What is the deal with that?

Bruce Linton: Well, so we started looking probably more than a year ago, about a U.S listing. The reason we weren’t all that fuss you know was at that time who would talk to us? The reason we wanted a U.S listing is that between SCC and FINRA they do a pretty diligent job.

I think what they signal to institutional investors is, this is an entity which is in full compliance of all federal laws. I’m not asking people to agree with the federal laws, I’m saying money doesn’t like to disagree with federal laws.

So, we did that review and then we parked it. Well we got busy with Constellation and we came back to it. Constellation is on the New York Stock Exchange and so we reached out to them. I’m not sure they were originally so excited about us being on, but then they worked through it.

James West: (Laughter) They warmed up to it, did they?

Bruce Linton: You know at the end of the day the exercise was about credibility and good governance. The New York Stock Exchange when you think who has rung that bell? Who are your neighbors on that exchange?

James West: Yeah, exactly.

Bruce Linton: And so, if I go to a European jurisdiction now, do you think in the first three lines of introducing the company it won’t come up every time, that we’re listed on the New York Stock Exchange?

James West: Even on this very interview we are posting you as NYSE listed not TSX.

Bruce Linton: Even though they’re closed today?

James West: (Laughter) Well there you go!

Bruce Linton: Let’s recognize everybody who comes onto your program is trying to end and evolve out of prohibition and as much as we may be comfortable about the topic and the dialogue, we’re not yet the majority. What you can do to onboard people is important and I think the New York Stock Exchange is a good on boarding tool.

James West: You bet. Do you think the market generally is interpreting your listing on the NYSE as an inevitably indicator of federal de-prohibition in the U.S?

Bruce Linton: No, I don’t think so.

James West: No?

Bruce Linton: I think the thing that’s clear with the U.S exchanges is they don’t have marijuana rules. They have rule rules which means you follow the model or you don’t get on there.

James West: Right, right.

Bruce Linton: Because we don’t participate in any world where it’s federally illegal, we follow the model. So it’s not about as much about what we do that caused some you know some analysis but it’s about the fact that we do it in full compliance everywhere we go. I’m not sure I would read more than that into it.

You know there was a run up in our stock in anticipation of going on. It traded kind of like “bleh” when we started on it, but it was a tough week right. It was Mr. Trump and North
Korea in love for a little while and we built up but our thought was this is place you’re going to be for a long time.

James West: You mean Trump in North Korea? (Laughter)

Bruce Linton: No, for us. (Laughter) For us on that exchange, and I really wanted to make sure you know once you’re there you start to do a lot of work. That work involves a lot of visits to tell your story to large funds that maybe before wouldn’t let you in the door.

James West: Sure.
Bruce Linton: And revisit those to say here’s another boxed check; let’s get you in.

James West: You bet. If I was to interpret the trading on the NYSE, subsequent to your listing on it, I would say that it looks to me like you haven’t really built any relationships of significance within the U.S capital markets at this point. Would that be a fair observation?

Bruce Linton: Yeah, yeah. When I saw the trading, it looked a bit like that. I think I probably presented in Boston more than a dozen times. There are large funds based in many U.S states which have seen us often but we couldn’t do a lot of pre-announcing to say get ready. It was

pretty much we’re going to list and then everybody’s question was “when”? And it was much sooner than expected.

James West: Yeah.

Bruce Linton: So, I think what you started to see is big institutions take a little while to get around the mechanics of how and I think it’ll be a week, or two or three and that should see their buying start to trigger.

James West: You bet. You bet. So, I guess listing on the NYSE, I mean we actually, I actually wrote this in an article because I’m quite sure it’s true but you can tell me; that means that big funds, big pension funds, big capital pools, the most conservative money in the world can now actually seriously look at you and say okay now we can take some exposure to the cannabis industry?

Bruce Linton: I think that’s true, right. If you go to an investment committee I think we check all the boxes. There’s still going to be some people that say just because it’s that we won’t, but it’s going to be harder and harder to have that view.

Because the rate of growth in this sector relative to pretty much everything else that’s going on is likely to pretty extraordinary. It’ll make the people who were in favor of it look pretty good, I hope.

James West: You bet. The NYSE agreeing to list your company on the most venerable stock exchange in the world is if nothing else the NYSE saying your company does not represent a threat to investors on our exchange, federal de-prohibition rules notwithstanding.

Bruce Linton: Correct.
James West: So that’s why I say, I look at it and say well this is clearly a sign that prohibition is

being anticipated with certainty by the largest stock exchange in the world.

Bruce Linton: Maybe. I like and I don’t want to spoil your headline but when I read your stuff and I think you had another line in there that was something to the extent, we now have an equivalent currency with a lot of other very interesting companies.

So, if I start try to do things rather they’re Pharma companies or other, it starts to really not look like this funny Canadian denominated TSX because you know we’re from Canada so we think it’s normal. Much of the world doesn’t look at Canada and say well there’s an extremely well run financial regulated system.

Right? We have earned our reputation by allowing a lot of things to go on and so I think it just means there’s a bunch of people who are pretty comfortable with that exchange and FINRA and SCC and all the regulatory compliance because that’s a big deal.

James West: For sure.

Bruce Linton: Those guys, you take them very seriously and you know things like compliance, there’s a lot there. When you go say I want to be on an exchange you better be ready to do the work.

James West: Yeah, no doubt. So then let’s talk about your most recent financials because they were pretty impressive as well.

Bruce Linton: They’re so old now.
James West: Sorry, I thought those were somewhat recent.
Bruce Linton: Well we have a year-end announcement I think about the third week in June. James West: Okay.

Bruce Linton: So, where we are you know exciting stuff going on today and the reason I was a little late-ish. Canopy Rivers is something we sort of worked away setting up for the last couple of years; formally funded once in June and another time after that and our intent is to get that one listed.

James West: Right.

Bruce Linton: And the reason is it’s a nice amenity Inc. If you’ve got Canopy and Rivers, essentially you have what we offer but then you have the torque on essentially an entity that takes capital, deploys it into the sector but it doesn’t mean just growing. It could be growing, could be how you find clients, could be processing into finished goods but you take those pieces and you take it across a whole bunch of companies.

They go in with the money but they also then go in with the Canopy support which means we’ll give you our best practices, which means you accelerate how quickly you get to your business. So that one’s going quite well and we think we’ll list that up in the next, you know 60 to 90 days.

We just had a board meeting earlier today going through it and the board is interesting right. We’ve put together some names that probably weren’t interested in being in the cannabis space four years but now were we’ve evolved them, why that’s a stable company, are interested in being on it.

James West: Yeah, we’ve seen well the fact of Canopy River’s making an investment in a lot of the most recently listed companies is a fundamental development for them that actually allows them to enable, to raise capital at a premium.

Bruce Linton: Yeah, it does show a decent rate of return for about a year’s effort.

James West: (Laughter) Doesn’t it?
Bruce Linton: Not bad.

James West: So, Canopy River, how much of Canopy Rivers does Canopy Growth own?

Bruce Linton: We’re about a third.
James West: One third?

Bruce Linton: We structured it were we’re about a third. We also have an advantageous voting structure because that way we can actually feel comfortable sharing all of our best practices and not having them swooped away if you know a big tobacco firm decided to come in and try to grab up the portfolio.

James West: Right.

Bruce Linton: It means that we can really accelerate it and then the relationship I like is further if you get working with Canopy Rivers you have the chance to make a great business but you also have an option that if it turns out in the right geography you have a good next home and that could be Canopy. I think a lot of entrepreneurs want to build a business, grow a business and sell a business, so we’ve become a one stop shop for that.