Shares in Aphria Inc. dropped more than 13 per cent on Tuesday as the marijuana producer announced a deal to raise $80 million even as questions swirled about the future of its listing on the Toronto Stock Exchange.
The company announced the bought-deal financing that will see it issue more than 11 million shares at a price of $7.25 per share.
Shares in the company lost $1.06 to close at $7.06 in trading on the Toronto Stock Exchange.
U.S. federal laws take precedence
The financing came a day after the TSX issued a staff notice that said U.S. federal law takes precedence over state laws, and issuers that violate the federal marijuana law are not complying with listing requirements.
Aphria said the TSX notice was "extremely broad" and that it was difficult to determine what, if any, impact it could have on its business.
"The objective application of such staff notice by the TSX to any entity engaging in activities related to the cultivation, distribution or possession of marijuana in the U.S. or entities engaging in ancillary services activities may prove to be challenging in determining actual compliance with such guidance," the company said in a statement.
However, it noted that marijuana is medically legal in 31 states and territories and that the U.S. Congress has prohibited the U.S. Department of Justice from using federal funds to carry out criminal or civil actions against state licensed medical cannabis operators.
The TSX clarification had been anticipated by marijuana companies looking to get a foothold in the U.S. market as well as U.S. companies that want to access capital on Canadian markets.
Active in the U.S.
Aphria, which is listed on the TSX, announced an investment in Florida in April of this year.
The company said its common shares have traded on the TSX and previously the TSX Venture Exchange for almost three years during which time it has raised over $216 million. The company added that it has had marijuana-related activities in the U.S. since 2015.
Meanwhile, shares of Canopy Growth dropped 61 cents, or more than 4.5 per cent, to end at $12.52 even as it said that the TSX staff notice would have no impact on its operations and praised the move.
Canopy said the decision by the TSX was a step in the right direction.
"We take our responsibility to our shareholders seriously and as such have chosen to conduct business in jurisdictions where it is federally legal to do so," Canopy chairman and chief executive Bruce Linton said.
Meanwhile, the Canadian Securities Administrators, the umbrella organization for Canada's provincial and territorial securities regulators, appeared to take a much more lax approach.
It said companies must tell investors about certain risks when they invest south of the border — where issuers with marijuana-related activities in the U.S. assume certain risks due to conflicting state and federal laws.