AYR Strategies Begins Trading on NEO Exchange

AYR Strategies Inc., formerly known as Cannabis Strategies Acquisition Corp. (CSA), made its debut on Toronto’s NEO Exchange on Monday, making it the first recreational cannabis company with an enterprise value over a billion dollars to list on NEO. AYR will trade under ticker symbols AYR.A, AYR.RT and AYR.W.

This marks yet another U.S. cannabis firm to be listed on a Canadian exchange, and about a month after Columbia Care Inc. (NEO: CGGC.UN) debuted on the NEO Exchange as well.

Newly formed AYR, is the result of CSA acquiring five distinct cannabis businesses operating in Nevada and Massachusetts. And now the qualifying transaction is closed, CSA has transitioned to its new presence under AYR.

And by doing so, it becomes another large multi-state operator in the U.S. that could prove to be a formidable threat in the industry. AYR could be in position to take advantage of Nevada’s hot market for cannabis.

The company also now owns some key packaged goods brands and it could prove to be a big player in the edibles segment. Brands like Highly Edibles, Dutch Girl, CannaPunch and Nordic Goddess will give the U.S. firm options to grow and diversify.

AYR’s CEO Johnathan Sandelman sees a lot of potential growth from these acquisitions:

With today’s five acquisitions, AYR instantly enters the market as a vertically integrated Multi-State Operator and a leader in the U.S. cannabis sector. This new platform provides us with a unique opportunity to leverage best-in-class cannabis operating talent and product expertise to drive synergies across our entire anchor portfolio. The added scale will also dramatically improve our ability to create regional brand strength, which is a key element of our growth strategy.

Integrating five companies at once may present AYR a challenge, but Sandelman points out opportunities for synergies to be realized across the companies.

Problems can occur while trying to effectively and efficiently integrate the five companies under a single, unified brand. And that’s why cannabis companies can get bloated with expenses after acquisitions and struggle to keep costs down. Differentiating costs related from inefficiency versus growth can be unclear and can make earnings reports unreliable.

Sandelman did, however, preach discipline when talking about exploring possible opportunities:

As we look ahead, we will remain disciplined in our M&A approach to create strong regional clusters in core geographies, while aggressively pursuing organic growth within our existing portfolio.

Focusing on nearby regions may be a good way to take advantage of the brands that the company already has in place today, as opposed to acquiring positions in brand new areas of the country. It’s a different strategy from other companies, but it could be a good way to minimize costs by reducing travel between locations.

Ultimately, investors will have to wait and see how well the strategy works. More than likely, the industry will see more mergers and acquisitions, as cannabis legalization continues to progress in the U.S. Investors have witnessed a bit of an arms race with many cannabis companies taking out positions in what could result in some heated competition down the road.