TORONTO—Trading of cannabis stocks has been a part of life for years on Canada’s major exchange, but Wednesday’s official kickoff of recreational cannabis sales in the country was still a cause for a celebration. On the day Canada became only the second country to officially legalize adult recreational marijuana use, a group of pot-company executives gathered to ring the opening bell in the Toronto Stock Exchange building. Representatives from Cronos Group Inc. CRON, +4.02% CRON, +4.78% , Horizon's cannabis ETF HMMJ, +4.11% and Green Organic Dutchman Holdings Ltd. TGODF, +7.57% TGOD, +6.67% attended the gathering, among others. A guide to pot stocks: What you need to know to invest in cannabis companies The Wednesday gathering was not just a celebration but also an act of validation for an industry that at one point in the not-too-distant past was run by outlaws, smugglers and drug dealers, but is currently transforming into just another sector. Aside from one exception, the bell-ringing room was full of suit-wearing executives with assistants and portfolio mangers of exchange-traded funds that have transformed a black-market business into a multibillion-dollar industry. “It’s historic what we’ve done here, and we’re proud to be sitting at the center of all this … to facilitate the growth of cannabis companies in Canada,” Loui Anastasopoulos, president of capital formation at TMX, said in remarks Wednesday morning; TMX runs the Toronto Stock Exchange. Anastasopoulos said the first cannabis company listed in 2014. As of the end of September, there were at least 43 cannabis stocks listed on TMX’s two exchanges with a combined market value of C$46.79 billion, roughly $36 billion. Five years ago, the combined market cap of the sector in Canada was zero. Don’t miss: Cannabis companies don’t expect blazing start to legal pot sales in Canada “For the first nine months of this year, we’re already ahead of C$2 billion in equity capital raised,” Anastasopoulos said. The one exception in the room full of suits was Pete Young, master grower at Indiva Ltd. NDVAF, -0.93% , who stood out with dreadlocks and hemp-made apparel and reminisced with MarketWatch about decades of growing pot and illegally delivering the drug to customers on a bicycle. He said though many things have changed in the cannabis industry on the path to legalization, he was not willing to change the way he looked to suit what bankers and investors thought he should dress like. “I don’t own a suit,” Young said. “No wait, I own one suit and it’s brown corduroy. But I’m not going to wear one here. This is me.” After a brief toast of orange juice and soda, the assembled executives cheered loudly as they counted down to the market’s open. Weed stocks did not fare well in Wednesday’s trading session, but red ink wasn’t enough to dampen the mood of those assembled after a tremendous run-up ahead of legalization. The six major pot producers that MarketWatch profiled ahead of legalization traded mostly lower, with Aphria Inc. CA:APH the outlier with a gain of 3.3%. Aurora Cannabis US:ACBFF ACB, +6.08% fell 3.4%, Tilray Inc. TLRY, +7.83% closed 6.4% lower, Cronos declined 7.6%, Canopy Growth Corp. CGC, +0.79% WEED, +1.17% dropped 4.4%, and GW Pharmaceuticals PLC US:GWPH dipped 0.2%. The bell-ringing and beginning of recreational legalization were also a demonstration of the success of regulations in Canada in terms of protecting investors and ensuring companies listed on major exchanges disclose information necessary to making informed decisions, said Michael Kousaie, vice president of strategy for the Toronto Stock Exchange and TSX Venture Exchange. “When you’re building a sector from scratch, dealing with entirely new issues, dealing with changing federal regulations, dealing with different regulations in different countries, investors look to those key regulatory bodies themselves to establish a framework,” Kousaie said. “The fact that there is credibility put in place by the TSX, by the TSX Venture, by the securities commissions — I think that goes a long way to supporting the growth and success of the business.”<doc-sep>Days after recreational marijuana became legal in Canada, our neighbors to the north may already be running out. Long lines and swamped websites greeted the first day of marijuana sales Wednesday. SDQC, which manages sales in Quebec, recorded more than 12,500 in-store transactions and 30,000 online orders the first day, "far exceeding" expectations. Within days, some products were posted as unavailable on the website. "Given the craze created by the legalization of cannabis and the scarcity of products across Canada, the SQDC expects significant short-term supply challenges for branches," the company said. Halfway across the sprawling country in Manitoba, Manitoba Liquor and Lotteries warned that shortages for some products could last months. The Ontario Cannabis Store didn't paint quite so glum a pot picture, warning that legalization has "resulted in a high volume of orders" but adding that deliveries should still be made within one to five business days. "We apologize for any inconvenience," the statement said. More:Marijuana is legal in Canada, but dealing in weed remains a challenge More:Olympics gold medalist Ross Rebagliati is all in on new pot law Bill Blair, a Canadian legislator who led the legalization drive, told public broadcaster CBC that suppliers are struggling to meet roaring demand across the nation of 37 million people. “We expected certain strains might run out and there would be a bit of a run on supply,” he said. “But, you know, they've got a pretty good infrastructure in place and I'm confident it will work" in the long term. Canada is only the second country behind Uruguay and the first member of the Group of Seven nations to legalize, regulate and tax the sale of marijuana. The law allows adults – provinces determine the legal age – to possess up to 30 grams of pot, dried or equivalent in non-dried form. They can also share up to 30 grams with other adults and grow up to 4 plants per residence for personal use from licensed seeds or seedlings. Possession, production and distribution, and sale outside of what the law allows remain illegal and subject to criminal penalties, ranging from ticketing up to a maximum penalty of 14 years imprisonment. The industry is already spurring additional business opportunities – a Girl Guide, the Canadian equivalent of Girl Scouts, sold 30 boxes of cookies outside an Edmonton pot store in 45 minutes. More:Pot stocks get investors buzzing after Canada legalizes use of marijuana More:What to know about Canada's new legalization rules for recreational marijuana Supporters of legalization in the United States are hoping that success in Canada will help drive legalization in more U.S. states. The U.S. Customs and Border Protection, however, has warned that its position on pot did not soften with Canada's decision to legalize. "CBP officers are the nation’s first line of defense in preventing the illegal importation of narcotics, including marijuana," the agency said in a statement. "U.S. federal law prohibits the importation of marijuana and CBP officers will continue to enforce that law."<doc-sep>“We are right on the eve of the legalization of trees in Canada. At 12 o’clock midnight, you can smoke what you want, take hits from the bong. Canadians, make some noise!” It’s a new era for Canadians — the full legalization of marijuana across the country. It’s been legal to consume cannabis here for medical reasons since 2001. But now, anyone in Canada over the legal age can get high. And that means Canada’s booming weed business is about to get a whole lot bigger. We went to see some of the producers who are set to take advantage of this opportunity. “It’s got kind of a citrusy and pine smell both at the same time. This is one of the Kushes. It’s got more of a turpentine, maybe a little more earthy smell. This is a very popular strain for us. We call this deep purple, very fruity.” Warren Bravo was a co-founder of Green Relief, a medical marijuana company that is now well-placed to enter the recreational space. He’s aiming to increase production 20-fold over the next year and a half. And that’s nothing compared to Canada’s top marijuana producer: Tweed Inc., a brand of big-time operation, Canopy Growth. One vault here can hold about $150 million worth of cannabis. “Yeah, so in this facility, on this side that we’re touring here, we have 24 flowering rooms and then about another 24 on the other side as well. This is, at the end of the day, what all of the fuss and excitement is about, I guess. When we reached out the first time, I think, you know, the New York Stock Exchange probably, you know, rightly said, ‘No way.’ You know, we’re not having a cannabis company. And then that education process started. And if you try to break down these barriers, and demonstrate we’re a normal company creating a normal product like anyone else.” And it’s a product that’s becoming a formal field of study, fast. “We’re running the only postgraduate certificate program in cannabis in Canada.” Bill MacDonald teaches a class of 24 highly dedicated students, that includes a former police officer. “It did take some reconciliation because I was, obviously, on the other side. But it’s in society. It’s out there, now. So, if we’re going to have it and it’s going to be here, let’s control it properly.” That’s the thing — for people who were hoping for a free-for-all and one-love openness, it’s a disappointment. “Cannabis is going to be legalized in certain contexts, but it’s also going to be very heavily regulated. And my concern is that people don’t recognize the extent to which it will still, in certain contexts, be illegal. And that might bring them in conflict with the law.” “African-Canadian people, our community is very afraid to now come out and actually be a part of this market, because we’ve been criminalized for so long.” Noni Haynes is part of a group leading a discussion on new cannabis laws at a local community center. “And who is making money from the weed? Not the average person.” “I don’t know if you don’t know, we live in a capitalist society. And, you know, within capitalism, anything goes.” “That’s a very good point. I mean, now is the opportunity. If you capitalize on that, you have your business, or you grow your business, you expand your clientele. And you treat it like an actual corporation.” A few days before legalization, we came to a kind of marijuana farmer’s market in Toronto, at Planet Paradise. In the past few years, this place has been tolerated by police. But now, fines have been ramped up, and the organizers here are shutting shop, worried about a crackdown. “We’re planning on not really having anything like this till we see where the law is going to go. Because we don’t want to have a bunch of issues ourselves, right? So we figured we’d have one last hurrah, just to get people together and smoke.” We travelled to an indigenous Mohawk territory, another place where marijuana is openly sold illegally. There are over 40 unlicensed dispensaries here. Jamie Kunkel owns one of them, Smoke Signals. He’s not worried. “The amount of customers that we go through, I believe, is going to increase because of the system that they’ve set up. They’re not providing the Canadian constituency with a reasonable place to purchase this plant. I personally think they’ve set themselves up for failure.” Jamie is pointing to the fact that there are no legal brick-and-mortar dispensaries in the province of Ontario. Lawful purchases must be made online, and those do not include any of the cannabis-infused products sold here. “Milk chocolate espresso beans, milk chocolate almonds. Jeez, you know, I was really looking forward and hoping it was going to be the salsa.” Canada is only the second country in the world to legalize cannabis after Uruguay. But it’s the first major economy to run this experiment. And whatever it leads to, Canada will be leading the way.<doc-sep>Just more than a week after Canada became the first G-7 nation to legalize marijuana for adult recreational use, provincial sellers are reporting supply shortages and other difficulties getting the product to consumers. Federal government officials and executives at major marijuana producers around the country warned MarketWatch in past interviews that the first weeks — even months — would not run like clockwork following Oct. 17 legalization. The dearth of bricks-and-mortar retail locations in some of the country’s largest provinces, a rotating national postal strike which has hampered online orders and a backlog in federal licensing have all worked together to exacerbate what was already a challenging undertaking. “Yes, the long-eluded-to ‘supply crunch’ is now a reality,” Deepak Anand, vice president of business development and government relations at marijuana-consulting company Cannabis Compliance Inc., said Friday. “Licensed producers are certainly looking to supply more product.” From earlier: Cannabis is now legal in Canada, but pot companies expect a rocky start In Quebec, the country’s second most populous province, the government said its offical store would only be open from Thursday to Sunday, closing the rest of the week because it didn’t have enough pot to sell. The online store will remain open and the bricks-and-mortar retail closures will continue until further notice. Quebec has set up agreements with only a handful of licensed producers, but even provinces with many more supply agreements suffered from issues. The Ontario Cannabis Store, or OCS, an online retailer operated by the country’s most populous province, Ontario, was receiving complaints online about delivery times and cancellations as well as quality of the product. Officials said the online store made 100,000 sales within the first 24 hours and as of Tuesday afternoon had processed 150,000 orders since Oct. 17. The OCS said it has enough pot to supply all the orders and continues to receive more. Shortages and delivery issues around the country have been compounded by rotating strikes by the country’s national post office Canada Post, which have affected different regions. For example, the post office told a Canadian newspaper that Toronto, the largest city by population in the country, is a “significant mail and processing hub” and striking workers are making the “best efforts to minimize any impact on service.” Roughly 9,000 postal workers walked off the job in Toronto on Tuesday. Not every province has suffered from problems, however. New Brunswick sold C$2.1 million worth of cannabis the first week with few issues. For the largest licensed producers, it’s less clear how the shortages will affect the quarter’s sales and profits. Buyers in Nova Scotia, which sells in government-run stores, and Alberta, which has deployed private retail stores in several cities, said that they had received about 40% of the weed they ordered from the country’s licensed pot producers. Don’t miss: Canada’s pot party includes big demand, short supply, and stamps with no glue Major producers MarketWatch talked with in Canada last week such as Canopy Growth Corp. CGC, +0.79% , Tilray Inc. TLRY, +7.83% and Cronos Group Inc. CRON, +4.02% were expecting issues to come up from the beginning. “The system won’t be perfect out of the gate, and we shouldn’t expect it to be,” Aurora Cannabis Inc ACB, +5.20% Chief Corporate Officer Cam Battley told MarketWatch in an interview last week. “It’s a nationwide, very complex system with 13 jurisdictions, plus all of the municipalities. Are you kidding me? It’s going to take a while to iron out, but it’s going to be fine.” For new producers hoping to meet some of the demand, the road is not easier either. According to a Bloomberg report Friday, Health Canada may take take up to 341 days to process a new cannabis sales license application.<doc-sep>
SMITHS FALLS, ONTARIO—The launch of the recreational cannabis industry in Canada will be a volatile ride, but the companies forming the industry seem prepared. Bruce Linton, the co-chief executive of Canopy Growth Corp. CGC, +0.79% WEED, +1.17% , braved a roughly five-hour flight from the tiny town of Smiths Falls to Newfoundland on Tuesday night, despite 60-mph winds creating enough turbulence to make landing treacherous, just to sell one of the first grams of legal weed in an outpost a half-hour ahead of the Atlantic time zone. The media opportunity was so much of a risk, he and fellow CEO Mark Zekulin decided that only Linton would make the voyage. On the other side, though, Linton was able to officially mark the end of one era and the beginning of another: After nearly a century of prohibition, Canada became only the second country in the world, and the only member of the G-7, to legalize the drug for recreational use. Marijuana is officially legal in Canada. The turbulence won’t end with Linton’s flight. With little history or precedent for Canada to follow, the early months of recreational cannabis sales face ambitious timelines set by the governing party, a different set of laws in each of the country’s 10 provinces, and potential supply shortages as Canada’s federally licensed producers expand production. Canopy executives, as well as colleagues at Aphria Inc. US:APHQF CA:APH and Aurora Cannabis Inc. US:ACBFF ACB, +6.08% and outside experts, told MarketWatch in interviews this week that they expected significant shortages on day one of legalization. A guide to pot stocks: What you need to know to invest in cannabis companies Cannabis entrepreneurs at the Toronto Stock Exchange on Wednesday Geoff Parkin for the TSX The pot producers have been frantically building out operations since the legislation passed earlier this year, as their stocks have drawn interest from well beyond Canadian borders for the chance that they could have an early toehold in an eventual global industry. Companies like Tilray Inc. TLRY, +7.83% and Cronos Group Inc. CRON, +4.02% have listed on U.S. trading exchanges as everyone prepares to see what the market will actually look like. Canada offers a ripe market to test a legal cannabis industry: Mackie Research analyst Greg McLeish estimates that about 19% of Canadians consume cannabis in one form or another, much higher then the 4% average world-wide, according to the United Nations. CIBC estimates by 2020, the country will consume C$6.5 billion in revenue, or about 810,000 kilograms of pot annually. There are more than 120 federally licensed producers in Canada, and to hear executives at those companies tell it, each one has a special blend of plant genetics, brand smarts, production efficiency and reach to make stockholders rich and rivals envious. The companies behind those swollen market caps will now have to prove their pitches by showing they can adapt, as investors wait to determine the winners. “We are all experiencing supply chain issues for a myriad of reasons, some controllable and some not,” said Vic Neufeld, CEO of Aphria, which had to dispose of 14,000 pot plants last quarter because there wasn’t enough staff to harvest the buds when they ripened. Read also: Weed beer is near, and its gonna get weird There are also a shortage of retail locations. In the country’s most populous province, Ontario, there are no bricks-and-mortar stores open on Wednesday, and won’t be for months. After a new government took power in a recent election, Ontario opted to sell pot online via a government-run store and allow private companies to open up stores on the ground. In Quebec, the second most populous province, there will only be a handful of stores around the two major cities, Montreal and Quebec City. “There will be a severe supply issue,” Mackie analyst McLeish said. McLeish calculated that it will take 16.6 days to satisfy customer demand in Quebec, assuming the 12 stores open on Oct. 17 remain doing business for 12 hours a day following legalization. In Ontario, 500 stores would take 14.8 days to meet demand under the same conditions, according to his projections. “The system won’t be perfect out of the gate, and we shouldn’t expect it to be,” Aurora Chief Corporate Officer Cam Battley said. “It’s a nationwide, very complex system with 13 jurisdictions, plus all of the municipalities. Are you kidding me?