We are entering what seems to be a golden age for small producers as more companies than ever are seeking listings on major U.S. exchanges.
In particular, the NASDAQ has become the go to index of choice for these small producers, thanks to the success of earlier companies such as Tilray (NASDAQ: TLRY). Following another such announcement made over the weekend, a well-known Canadian producer called KushCo Holdings has just filed for an IPO on the NASDAQ in what has been another significant cannabis IPO.
While the application is subject to approval from the exchange as well as other regulatory bodies and their subsequent requirements, it’s fairly certain that KushCo will be joining the many other small cannabis producers that will be listing on the NASDAQ in the upcoming months.
“Listing on the NASDAQ Global Select Market, the highest and most prestigious NASDAQ tier, will raise the company’s profile by diversifying our shareholder base and enhancing share liquidity in support of our company’s long-term goals and objectives,” said Nick Kovacevich, Chairman and Chief Executive Officer of KushCo.
While KushCo has been seen by some as a potential small-cap cannabis play, the company has reported relatively poor earnings for 2019. Although KushCo wasn’t expected to be profitable, management team set a gross margin target of around 30 percent, a goal which proved to be too ambitious as KushCo ended up absorbing higher import costs for vaporizer products from China thanks to tariffs.
Although the company recently announced they would stop eating those higher import costs, passing these increases along to consumers, this move isn’t expected to have much impact on overall sales as vaporizers remain so popular that a modest increase in price isn’t likely to scare off buyers.
KushCo is joining a number of other small cannabis producers that are jumping to list on the NASDASQ. Just yesterday, Sundial Growers announced they were planning a $100 million IPO on the NASDAQ, joining another producer, Flowr (NASDAQ: FLWPF), which went public earlier on the exchange with a $94 million listing.
With marijuana becoming mainstream to retail and institutional investors, acquiring a listing on one of the largest U.S. exchanges could lead to a surge in investment and potentially catapult the company into the multi-billion-dollar mark in a similar fashion as Tilray and Cronos Group (NASDAQ: CRON).
Shares of KushCo Holdings jumped by almost six percent on the OTC markets on Monday in response to the news, a significant jump for a $500 million market cap company that’s listed on a minor exchange.
The past six months have seen the company fall significantly, declining from its peak at $7 per share down to $5.22 as of Monday afternoon. While it’s uncertain whether listing on such a prestigious exchange will catapult share prices as high as the management team would like, it’s undeniable that traders will have plenty of opportunities to cash in on price movements thanks to this new wave of cannabis IPOs.
Keep an eye out for KushCo in the weeks and months to come.