TerrAscend Corp (CNSX:TER) Positioned To Enter U.S. Vertically Integrated Markets

Benjamin A. Smith
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TerrAscend Corp (CNSX:TER) (OTCMKTS:TRSSF) is wasting no time establishing a footprint in a major U.S. market. Just three weeks after shareholders approved a plan to reorganize the company’s capital structure to allow it to pursue U.S. opportunities, the inaugural moment may soon arrive.

Today, TerrAscend announced that its majority owned subsidiary, NETA NJ, LLC, was awarded a permit by the State of New Jersey Department of Health to apply for a vertically integrated license in Phillipsburg, NJ. It was among the few applicants accepted to cultivate, process and sell medical cannabis in this densely populated region of the state. Furthermore, NETA was the highest scoring applicant in a pool consisting of 146 applications—one of only six successful bids statewide. The odds of failing to secure a license at this point appear unlikely.

Each application was scored by a six-member committee selected to provide expertise across a wide range of areas, including plant sciences, diversity and inclusion, and regulatory aspects of the medicinal marijuana program. The finalists were chosen as part of New Jersey’s plan to increase the number of eligible conditions for the growing patient population, which totals about 40,000.

Earlier this year, New Jersey Governor Phil Murphy called for a large expansion of the medical marijuana program, and took immediate steps to make it happen. Should these applicants cross the finish line, they’ll be the first new dispensaries added as part of that plan. State Health Commissioner Shereef Elnahal is expected to meet with the finalists early next year, “to refine their timetable for growing product and opening their doors.”

From a macro perspective, the news is symbolic in that it’s among the few instances where Canadian operators may directly enter U.S. markets through strategies which circumvent exchange requirements. In this case, TerrAscend has previously authorized the issuance of a new class of non-participating, non-voting, unlisted exchangeable shares (ES)—with majority shareholder consent—to operate vertically integrated dispensaries without jeopardizing their exchange listing. It hasn’t officially happened yet, but it’s coming.

It also positions Canopy Growth Corp.—which held 11,285,456 common shares and 9,545,456 full-share warrants (11.7% fully-diluted) before the ES arrangement—as an indirect beneficiary to the transaction. An interesting subplot going forward is whether Canopy can leverage their relationship with TerrAscend to obtain a direct U.S. retail presence once the U.S. legalizes cannabis. It would be quite the stealthy backdoor maneuver if proven true.

TerrAscend finished the day up $1.00 to $7.02/share (↑16.61%).

Benjamin A. Smith

Benjamin A. Smith

Ben is a research analyst and capital markets professional with nearly 20 years of experience. His areas of expertise are broad-based, and include extensive knowledge of macro economics, stock/derivative trading, commodity complexes, cryptocurrencies and technical/quant analysis. He also maintains an particular affinity for U.S. politics and the macro-regulatory environment facing...
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