Pot Firm Backed by Russia Banking Veteran Makes Public Debut

(Bloomberg) -- U.S. pot companies are pushing north of the border in search of capital.

Curaleaf Inc., a Massachusetts-based company backed by Moscow banking veteran Boris Jordan with roughly 30 pot stores in 12 states, raised C$520 million ($396 million) through a private placement. Curaleaf says the sale values the company at about $4 billion, making it one of the biggest U.S. pot companies by market capitalization. The stock fell in early trading on the Canadian Securities Exchange in Toronto.

“This is about creating a currency we can use to keep acquiring businesses,” said Jordan, the chief executive officer of Sputnik Group who is executive chairman of Curaleaf. “We think there is going to be huge consolidation -- we’re going to move very quickly.”

With marijuana now legal on a federal level in Canada, more U.S. companies are seeking to take advantage of the buzz surrounding the industry with public listings there. The federal ban in the U.S. has made it tricky to raise domestic capital, keeping many banks and large institutional investors largely on the sidelines as pot starts to go mainstream.

The CSE has become the go-to listing spot for cannabis companies with U.S. operations, as the big New York exchanges and the Toronto Stock Exchange don’t allow listings by companies that are violating federal law in the jurisdiction where they operate.

Curaleaf, which listed via a reverse takeover on the junior bourse, traded at C$9.35 as of 12:55 p.m. in Toronto, down from its private placement price of C$11.45.

Canadian legalization is giving U.S. companies a chance to raise money to fund acquisitions, as American firms jockey for position amid the continued creep of legalization at the state level. While the tangle of state laws has made it difficult for national players to emerge, that is starting to change as companies including MedMen Enterprises Inc., Curaleaf and Acreage Holdings buy up licenses and expand their footprint.

Jordan and his partners took over a Massachusetts maker of medical devices in 2015 and spent more than $100 million to create a national chain of dispensaries. Curaleaf -- which had revenue of $30 million in 2017 and expects to hit $100 million this year -- has medical stores open in New York, including one in Forest Hills, Queens. It’s also focused on densely populated states like Massachusetts, New Jersey and Florida.

Jordan, who co-founded Renaissance Capital more than two decades ago after supporting the privatization programs in Russia’s Boris Yeltsin era, said it’s only a matter of time before U.S. pot companies are more valuable than Canadian competitors. While the industry in Canada has a head start, he said tight regulations there will restrict the market, and he said he expects marijuana to soon be legal for adult use up and down the U.S. East Coast.

“It’s not that the U.S. is better than Canada,” Jordan said. “I just don’t see the Canadians leading in this area due to the fact that the U.S. market is so much bigger.”

To contact the reporter on this story: Craig Giammona in New York at cgiammona@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Lisa Wolfson, David Scanlan

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