88
FORTUNE.COM// FEB.1 .19
SOURCES:
ARCVIEW
MARKET
RESEARCH
& BDS
ANALYTICSLEGAL STATUS IN THE U.S. RECREATIONAL
MEDICALada,” says Scott Greiper, Viridian’s president
and founder. For now, Cowen, the lead U.S.
underwriter of Tilray’s IPO, won’t take any
U.S.-based cannabis companies public, says
CEO Jeffrey Solomon: “Until there’s clarity on
federal law broadly, we’re going to continue to
focus on the rest of the world.”
That makes Tilray even more of an outlier.
It was not only the highest-flying IPO of 2018,
according to Renaissance Capital, but also one
of the top 10 performers in the U.S. stock mar-
ket. That ironic result was possible under stock
exchange rules because Tilray operated exclu-
sively outside America. The company will only
do business in jurisdictions where cannabis is
federally legal, and it has had zero U.S. sales to
date. As a result, the only Americans who have
so far enjoyed the fruits of its economic contri-
butions are stock investors and its U.S.-based
employees (including its entire C-suite).
Kennedy, whose predictions about legaliza-
tion have been profitable so far, believes an
end to the U.S. ban is close at hand. But for
now, the precarious legal dynamic gnaws at
him every time he crosses back from Nanaimo
into his native country. “I would not mention
what we just did,” the CEO quietly advises as
we sit on the tarmac in Seattle again, awaiting
a customs officer to clear us to come home.
While Kennedy has never been questioned,
he has reason to be nervous: A few Canadian
cannabis executives and investors have been
detained at the border and even barred entry
to the U.S. for life; a senior official at the U.S.
Customs and Border Protection agency con-
firms that even American executives operating
legally in Canada can face additional inspec-
tions upon their return. Adds Kennedy: “We
generally don’t talk about what we do when we
go back in the U.S.”N 2014, FOUNDERS FUND, Peter
Thiel’s venture capital outfit,
became the first institutional
investor to announce a stake
in the cannabis industry. Geoff Lewis, the
partner who led the investment (and has since
started his own fund, Bedrock), had the same
experience with a dozen cannabis startups
while looking for one to back. The owners
would offer him a “product sample” or ask “if
I wanted to smoke a joint”—something that
was illegal at the time because Lewis didn’tobserving that consumers are increasingly turning to the drug as
an alternative to booze, cigarettes, and painkillers. That has fueled
tie-ups like Tilray’s with AB InBev, as well as a global distribution
deal Tilray struck with Sandoz, a division of Swiss drugmaker No-
vartis, for co-branded cannabis oils and pills to treat ailments such
as epilepsy, sleep disorders, and post-traumatic stress—the only
partnership to date between a cannabis company and a big drug
company. Elsewhere, Constellation Brands, which makes Corona,
and Marlboro cigarette purveyor Altria have made multibillion-
dollar investments in Canadian cannabis companies.
Yet for all that interest, most money invested in marijuana is
leaving America. Public and private cannabis companies raised
$13.9 billion in capital in 2018, quadruple the previous year’s
total, according to Viridian Capital Advisors, an investment
bank that tracks cannabis deals. Of that sum, however, 69% was
invested outside the U.S. As long as cannabis remains feder-
ally outlawed, American businesspeople have to reckon with
the liability of, technically, aiding and abetting illicit activity, a
risk many have decided is not worth taking. “It’s kind of a damn
shame that so much capital has escaped the U.S. to go up to Can-
Legalization’s Green Wave
As of the end of 2018, 33 U.S. states and the District of
Columbia allow medical marijuana, and 10 states plus
D.C. have also legalized it for adult recreational use.
But a federal ban means the U.S. (and its would-be pot
entrepreneurs) still lags behind the rest of the world.
36 countries
HAVELEGALIZEDMEDICALUSE
(INCLUDINGCANADAAND
URUGUAY,WHICHALSOPERMIT
RECREATIONALUSE)
$12.3
billion
GLOBALSPENDING
ONLEGALPOTIN 2018