VIEWPOINT: Canadian banks should work with cannabis companies

By Rachel Jaskula

With the expected legalization of marijuana this summer, pot businesses are ramping up for major sales – and after years of being shunned by mainstream financial institutions, more business with Canada’s big banks.     

Recently, Canadian banks have become less resistant to the idea of working with cannabis companies as the widespread selling of pot moves closer to becoming legal.

The Bank of Montreal and Canopy Growth Corp. recently struck a major deal, highlighting the changing policies of some Canadian banks. The Smiths Falls-based producer of medical marijuana announced the $200-million agreement with the bank on Jan. 17.

BMO and Toronto-Dominion are making business accounts available for at least 20 other marijuana companies, according to recently published interviews with various pot firms involved in the weed industry.

The federal government has pegged July 2018 as the target date for legalizing recreational pot in Canada. People 18 and older will be able to legally purchase up to 30 grams of the drug at dispensaries and other locations without facing legal consequences.

Up until recently, larger Canadian banks had been hesitant to deal with pot companies due to the de facto illegality of the substance, despite the government’s promised move towards legalization.

In August 2016, Hemp County owner Nathan MacLellan said he was given a letter from Scotiabank stating that his account was being cancelled after more than 10 years, according to a CBC report from the time.

Smaller banks, financial institutions and independent brokers were left to handle marijuana companies’ financing and commercial banking.

In October, Canaccord, a smaller investment service company, and other brokers made agreements with Aurora Cannabis Inc. to give investors the ability to purchase shares of the company for three years at the offering price of $3.

This transaction resulted in big bucks for smaller banks. Aurora’s most recent price per share on the TSX is $13.

Looking at the exceptional profit pot companies are making, banks may want to continue growing their business within the industry.

Stocks for companies selling the drug continue to rise on the stock market.

By the end of 2017, the overall capitalization for Canada’s three largest pot companies, Canopy Growth, Aurora Cannabis and Aphira Inc., had reached $14.5 billion.

Within a single month between Nov. 28 and Dec. 28, shares of Aphira went from $11.47 to $18 – a 56 per-cent increase. During that same time period, the value of stocks in Canopy Growth rose by 61 per cent, from $18.85 to $30.41.

According to a report published by the Parliamentary Budget Office, the Canadian government is anticipating $5.5 billion in marijuana expenditures this year.

The rosy economic outlook for the marijuana business post-legalization stands in contrast to the police crackdown on dispensaries over the past year, when pot shops’ murky legal status made police raids at weed shops a recurring news event.

In 2017, there were 18 raids that shut down Ottawa cannabis stores – though shops frequently reopened soon afterwards.

Last year, on March 9, the Bank Street dispensary Cannabis Culture, was shut down by police along with six other locations because of alleged drug trafficking, conspiracy and possession of marijuana.

Once marijuana is legal, it will be sold at government-approved locations and online as well. And as Canadian banks appear to have finally realized, public anticipation for legal weed is, well, very high.