Despite the healthy medical marijuana industry in Canada, as well as pending recreational legalization this summer, not to mention the billion-dollar companies trading on the TSX, Canada’s big banks have long treated the cannabis industry like a pariah.
Not only do these financial institutions regularly refuse to do any business with legal and legitimate cannabis companies but even employees who work within the licensed marijuana sector have had problems getting credit or mortgages simply based on their connection to cannabis.
Recently, however, it looks like the Bank of Montreal (BMO) took the first leap and aligned itself with Canopy Growth Corporation, arguably the world’s largest cannabis producer. BMO led an equity financing round, underwriting a $175 million stock sale with the help of GMP Capital last week.
Companies that want to raise capital often issue new shares for sale, but up until this point, Canada’s big banks have been completely opposed to getting involved in such transactions.
In Aug. 2016, Marijuana.com revealed an internal memo within the Royal Bank of Canada (RBC) which instructed RBC employees to not do business with anyone in the cannabis sector.
“Due to the legal and reputational risk posed to the bank and potentially vulnerable to criminal involvement and money laundering, staff members are forbidden from opening business deposit accounts for marijuana or medical marijuana businesses,” read the memo.
Now, RBC’s direct competitor BMO has decided to throw caution to the wind and accept that cannabis is an enormous and sustainable industry, and ignoring such business would be mired in ignorance.
“This has been a process of five years,” said Canopy Growth CEO Bruce Linton. “I’ve been telling the banks to quit treating cannabis like it’s still prohibition in some old movie.” Linton added that for years “the big banks have been treating us worse than second-class citizens.”
Canopy Growth opened a bank account with RBC, which they used for two years until the bank decided to close the account despite Canopy’s breakneck expansion.
Other major licensed producers have also joined last week’s celebratory vibe. Executive Vice-President of Aurora Cannabis, Cam Battley, stated the move by BMO is “a very positive development and consistent with what we’ve been seeing as well.”
As Canada’s marijuana industry undoubtedly expands, with the Great White North arguably leading the world as the current dominant player in the space, one can only hope that other major banks will follow suit and realize that marijuana is not the scary street drug that society was led to believe for so many years. If nothing else, it is clearly an extremely valuable and legal commodity.