The History of US Cannabis Listings The capital markets for cannabis have really only come into their own in the past 12 months. Over the period billions of dollars of capital has been raised and companies are coming to understand the power of public exposure. Companies now see that the most efficient way to spread your message and bring in investors from new markets is to establish a stock ticker on those same markets. Cronos Group understood the power of a dual exchange listing first, listing on the NASDAQ stock exchange on Feb. 28, 2018. Canopy Growth followed soon after, listing on the New York Stock Exchange on May 24, 2018. Tilray, the third company to list in the US skipped a Canadian listing altogether and went public on the NASDAQ July 19. The stock prices of all three of these names continue to benefit tremendously from a US listing. The Power of a US Cannabis Listing We looked at the trading multiple of the three US- listed cannabis names vs their Canadian peers and we quickly realized there's a significant value gap. Cronos, Canopy, and Tilray trade at 37x EBITDA while the next eight largest Canadian names trade at only 12x EBITDA. U.S. Stock Premium Over Canada This is a massive multiple difference that shows access to US investors is worth all of the cost and effort it takes to obtain a listing. Even ignoring the fundamentals and just looking at market action, both Cronos and Canopy increased over 30%-45% from the day of the US listing announcement to the short-term share price peak. Price Increase From Listing Announcement 300%+ Upside from a Potential US Listing If Canadian producers who list on a US exchange see their trading multiple move in line with other US-listed peers there would be significant upside to stock prices. We think there are two possible upside scenarios Scenario 1 A fixed pool of US money is in cannabis stocks so money that flows into one stock will have to come out of another. The multiple on Tilray, Cronos, and Canopy falls to 24x from 37x today as investors in those names sell and move their money to Aurora and other new US listings. Scenario 2 New US investors are discovering cannabis stocks all the time so newly listed producers will receive an infusion of completely new money. The US group will continue to trade at a big premium with Cronos, Canopy, and Tilray maintaining their investor base and valuation. New listings have the potential to trade at 37x EV\/EBITDA as well. Upside from a US Listing Company Current Stock Price Scenario 1 Scenario 2 Aphria $20 $51 $78 CannTrust $15 $33 $50 HEXO $9 $24 $37 OGI $8 $23 $35 Source: Grizzle Estimates 4 Best Stocks to Play the Potential Up-list Many of the Canadian cannabis names are actively looking into a US listing. Aurora Cannabis is in the lead, with plans for shares to begin trading on the New York Stock Exchange before the end of October. There is little upside to play for with Aurora as the stock already spiked 15% when the listing was announced and now trades at the same premium as the US stocks. Better values can be found elsewhere. We think the way to play listings is to get ahead of the news and buy the names that don't talk up a potential listing even though they're actively considering one in private. Aphria, HEXO, and Organigram are our preferred way to play a potential listing. These stocks do not price in a future listing. All three trade below 10x EBITDA while US peers are above 30x. CannTrust has already benefited to some extent from uplist rumours, but can still see big share price gains once the rumours are confirmed. If any of these names do announce future listings expect a big pop on the day of the announcement and further follow through as the multiple moves in line with peers. Requirements for a US Listing The stocks we chose for this report have satisfied or are close to satisfying what we understand to be the conditions for a US stock exchange listing. \tStock price above $4.00\/sh \tGreater than 1.25 million shares outstanding \tMajority of the board of directors is independent \tMarket value greater than $500 million \tGreater than 450 shareholders for NASDAQ or 5,000 for NYSE Breaking it All Down A US stock listing has proven to be a hugely positive catalyst for cannabis stocks. Based on historical precedent, our preferred basket of four cannabis stocks have 200%-400% upside if they end up listing in America. Buying stocks like Aphria or CannTrust provide both a way to benefit from general cannabis market tailwinds and the massive optionality of a future US stock listing.