Times are about to get tougher for cannabis investors yet again. It seems US-based banks are about to begin cracking down on investments in “non-permitted cannabis related business securities.” The first bank to make such an announcement is Bank of New York Mellon Corp (BNY Mellon), who yesterday sent a notice to clients.
BNY Mellon, a bank with $35.5 trillion in assets under custody and who owns Pershing LLC, one of the largest clearinghouse’s for securities in the US, made the announcement yesterday morning. Within, it indicated that as of November 30, the firm will no longer allow for the trading in securities of US-operating cannabis related businesses. BNY Mellon also advised against the purchase of any of these securities during the grace period, indicating that they reserve the right to decline any trade.
Specifically, this would prevent its subsidiaries from touching any Canadian Securities Exchange (CSE) or OTC listed entities that are operating in the United States and directly dealing with cannabis due to the federal status of the plant. The details released by the firm indicated that any security listed on the New York Stock Exchange, NASDAQ, Toronto Stock Exchange, or TSX Venture already complies with the updated regulations.
The latest news comes at a time in which US-based operators are struggling to find additional sources of funding as sentiment in the sector declines. As of late, funding has come from groups such as Torian Capital and Gotham Green Partners, often at unfavourable rates to the issuers. Recent examples include the recent funding secured by iAnthus Capital (CSE: IAN), as well as transactions that have yet to close with Tilt Holdings (CSE: TILT) and Harvest Health (CSSE: HARV).
The latest development in the US cannabis space isn’t likely to result in any further capital coming to the sector in the near term, placing further strain on the public issuers. Firms are more reliant than ever on the SAFE Banking Act to pass through the Senate this fall as doors continue to close on US based equities.
Information for this commentary and analysis was found via Sedar and the linked sources in the article. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.