Marking a dramatic shift in previous policy, the Bank of Montreal will enter the cannabis space through a financial agreement with licensed Canadian marijuana company Canopy Growth.
Based in Smith Falls, Ontario, Canopy Growth recently sold major equity to GMP Securities LP and BMO Capital Markets, which is owned by Bank of Montreal. The company purchased roughly five million shares in the $175-million bought deal.
The move represents the first significant foray into Canada’s cannabis industry by one of the country’s Big Five banks. By being the first bank to head an equity financing deal with a publicly-traded cannabis company, the Bank of Montreal’s gesture could demonstrate a shift in thinking among Canada’s financial institutions.
The Big Five were previously hesitant to enter the cannabis space, leaving the financial opportunity to smaller and regional banks. Part of their reluctance stems from the Big Five’s major dealings in the United States, where cannabis remains federally illegal as a Schedule I drug. That status likely won’t change anytime soon, as the Trump administration has made significant moves to roll back former federal protections offered in the cannabis space.
This, in part, explains what kept members of the Big Five banking institutions from participating in Canada’s cannabis industry.
That stance may now be starting to soften amid a fundraising spree in the Canadian marijuana industry, which had been taking place without the country’s biggest banks. Companies involved in the already legal medical pot business have been seeking funding to serve the coming recreational market set to be legalized by the federal government this summer.
For now it remains to be seen what the Bank of Montreal’s move might represent moving forward. At any rate, it does showcase a significant shift in thinking regarding cannabis among the banks.