Sky High: Tales From Canada’s Potent New Weed Economy
Matei Olaru walks into a 16th floor conference room at PI Financial in a custom-made magenta suit tapered to the ankles. He’s thin like a gymnast, 28 years old, and has almost feminine features — a petite James Franco; James Franco meets Prince. More than once he characterizes himself and his cronies, entrepreneurs riding the billion-dollar marijuana Green Wave, as “risk-takers having the time of our lives.” He was raised in Toronto and born in Romania, the only son of two engineers. With a background in law and technology, he learned an important lesson from his father: if you want to be happy, never work for anyone else. He laughs frequently, smokes pot frequently, and infrequently seems out of his realm.
PI Financial has raised $1.3 billion for cannabis financings, and Olaru is the CEO of Lift & Co., a company that posts marijuana reviews, hosts expos and, in November, presented the Canadian Cannabis Awards. A table at the dinner cost $10,000. Tables promptly sold out.
We’re in Vancouver, capital of Canada’s marijuana boom, at day one of the Lift & Co. Expo, a cannabis event where 14,000 people — investors, hobbyist and the general public — will come to learn everything there is to know about getting stoned, and getting paid. In the meeting room at PI Financial, a giddy momentum hangs in the air. Between April 2016 and January 2018, the firm closed 35 marijuana deals, including three with Canada’s second largest (at the time) medical marijuana producer, Aurora, for a combined price tag exceeding $344 million. This, before they were involved with Aurora’s $1.1 billion takeover of CanniMed, the biggest weed deal of all-time (until Aurora bought MedReleaf in mid May for $2.9 billion, breaking their own record).
The bankers are middle-aged men except for the two members of their cannabis equity research team, who are men approaching their middle age. They want to take Lift & Co. public and are pitching Olaru and Craig Hudson, Olaru’s 39-year- old COO, who took a pay cut as head of digital at Indigo to work with him. Since the LPs (licensed marijuana producers) can’t advertise, Lift & Co. serves as a database for marijuana reviews.
Hudson, a numbers man and new father who bet the bank on getting weed rich, wears silver marijuana leaf cufflinks. Olaru’s a little more coy. When Business News Network asked him prior to an on-air interview if he was stoned, he was offended. In the new marijuana economy, being high, at least demonstrably, is gauche. “Cannabis is the subject matter; we’re a tech-data company,” explains Olaru, positioning Lift & Co. as a weed Google or Facebook in that its most valuable asset isn’t its web traffic or $10,000 tables, but what it knows about its users. Imagine Lift & Co. as Yelp, which was valued at $898 million USD at its IPO, except instead of reviewing restaurants, they’re reviewing bud. Its proprietary information, and audience demographics, is valuable to the government, to the billion-dollar licensed marijuana producers, and, apparently, to the investment banks. In our data-crazed moment, no one has weed information like Lift & Co. “Twenty-two per cent of our investors are participating in the cannabis buy-in; the other 78% were just too slow,” says Jeremiah Katz, PI Financial’s managing director, old enough to be Olaru’s dad. “We’re a leader in the Canadian Cannabis sector and feel strongly that we’re best suited to help with your go-to-market needs.”
Olaru isn’t easily sold. Since February, his industry has taken a hit, and not the good kind. Mid-sized publicly traded weed stocks on the Canadian Securities Exchange, like Abattis Bioceuticals and Lifestyle Delivery Systems, are fast becoming “wallpaper stocks,” companies whose share certificates might find their most value as wallpapering your bathroom. Another grower, Maricann Group Inc., based two hours south of Toronto, recently had a $70-million stock sale pulled after three of its directors, and the company’s CEO, were investigated by the Ontario Securities Commission. Much ink has been spilled suggesting the cannabis bubble’s been burst. Olaru isn’t swayed. He’s already met with five other banks and knows that, soon enough, his market of cannabis consumers will go from 250,000 to 4.9 million — the number of people Statistics Canada has estimated will annually consume weed. Companies that help licensed producers work with the government, like the seed-to-sale technology company Ample Organics — which has tracked 12 million grams of cannabis and is run by a 33-year-old — still thrive.
“It’s looking like you like to make acquisitions. What’s your involvement?” Olaru asks.
In 2017, Lift & Co had over $2 million in sales, which doubles their 2016 sales, and they’re projected to double that once again in 2018, surpassing $4 million. Olaru thinks has valuation will be $60 million at his IPO — at least. “You guys are confident. I like that,” says Olaru. Later, the bankers are going to walk the five short Vancouver blocks from their office to the Lift & Co. Expo. In the meeting, no doubt’s expressed that this sector could be overvalued, that Lift & Co. is unproven, that cannabis, like Bitcoin, could be a fad, could be shut down, could, like Facebook, become victim of a data breach and lose $36.4 billion USD in market value in a day. Cannabis, as an industry, attracts gamblers and thus far the gamblers — at least those who make it into rooms like these — have won. Olaru knows he has the hot hand. “This one group suggested that we need them more than they need us,” Olaru told me. “Actually, no, dude, that’s not true.”
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Sometime this year, after July but presumably, hopefully, before Halloween — nobody knows — Canada is slated to become the first G7 country to end prohibition and legalize marijuana. It’s a sector forecast by the accounting firm Deloitte to become a $22.6-billion industry — more than beer, wine, and liquor combined. In the lead-up, Canada has already become the world leader in weed. Not just production, but the attendant intellectual property — how to regulate, tax, ship, and distribute (though that one remains to be seen) — and, as Matei Olaru is learning, alongside ex-cops, rock stars, and Bond Rideout, a savvy former seafood exporter from Newfoundland, how to finance, navigate Health Canada and, maybe, get rich.
The prices of the Canadian weed stocks are based on their impending global domination. Aurora is worth $6.3 billion, even though last quarter it generated $8.3 million in revenue.
“It’s fair to say our valuations are ahead of where we are on the fundamentals, but what they’re giving us credit for is that we’re inventing a new global industry,” says Cam Battley, Aurora’s chief operating officer. Battley is 49, married, and has experience both in government and pharmaceuticals and a manic Michael Keaton-like vibe. He’s on the board of directors of the Cannabis Canada Association — there is such a thing — and took his 15-year-old son to Take Your Child to Work Day, though he wouldn’t let him post a photo on Instagram standing beside Dad and $1 million in weed. “Cannabis is not a bubble,” continues Battley. “Canada has the opportunity to be astride the world — we’re the future of worldwide cannabis production.”
In January, Aurora purchased a facility in Denmark. Canopy, based in Smiths Falls, Ontario, owns subsidiaries in Germany and Chile. MYM Nutraceuticals, based in Vancouver, is building the southern hemisphere’s largest cannabis greenhouse in Australia. And when Aphria purchased Nuuvera for $826 million on January 29, it was their marijuana import license into Italy that helped seal the deal. Weed is being grown in Canada to distribute in Canada. Canadian weed companies, on the other hand, with a head start on their rivals, are being launched in Canada, building infrastructure and best practices, to take over the impending legalized medical and recreational marijuana market all over the world.
“I said, ‘You want to give me millions at once. This is what you want to do.’ And they did.”
“This isn’t a Canadian issue. It’s a worldwide phenomenon,” says James Munro, 41, who co-founded the Medical Marijuana Group for his law firm, McMillan, in 2016. “Other countries are learning from Canada and trying to catch up.”
It’s as if suddenly, pot’s everywhere — you can smell it, you can buy it in the streets — and one of the things that’s most striking, besides the dollar figures, is the industry’s age (and, it’s been said, its race and gender: white and male). Munro, based in Vancouver, had been competing for clients in mining and forestry. “Part of the reason I leapt into cannabis is the grey hairs had won out on a lot of files where I didn’t have the experience to compete,” says Munro, who mirrors Olaru, the Lift & Co. staff, the CEO of Ample Organics, and the young PI Financial bankers — smart, clean cut, handsome, with a certain “Can you believe this?” shit-eating grin. “Flip that around to cannabis and people don’t have the experience. If you have three years of experience you’re considered very knowledgeable. Now I’m competing with people closer to my own age than at the end of their career.”
Walk through the Lift & Co. Expo with Matei Olaru and you’re taken aback by the flash. It fills up two halls at the Vancouver Convention Centre and features almost 300 booths. There’s business recruitment, Cannabis at Work, business assistance, LMG Insurance, and lots and lots of companies selling seeds and lights, dehumidifiers and strains of mail-order bud. At the Expo, the carpet’s plush enough to make snow angels, two booths have DJs, and one, from the licensed producer Up, is rumoured to have cost more than $100,000 to build (the company offers no comment). At the Lift & Co. station, where they’re selling booth space for the Toronto Expo in May, there’s a virtual reality centre where you can walk through marijuana fields, digitally caressing the furry purple and green buds.
“It’s the drug money, bro,” says Olaru, and he smiles beatifically as he walks through the room. He has a law degree from Western because he thought it would help him in business. He didn’t know which business until a chance meeting with a marijuana lobbyist caught his attention. He then paid off his law school debt buying and selling marijuana stocks on the Toronto Stock Exchange. Today, he has an interview with Breakfast Television and meetings with Health Canada and New York investors. But what has him most excited is his meeting with a data scientist from Harvard whom he wants to poach. “I love poaching people,” he says. “All of my key people are poached.”
David Brown is a founder of Lift & Co. and he’s leaving the company to work with the government, shaping policy as Canada’s Cannabis Legalization and Regulation Secretariat. Aurora’s Cam Battley saluted Brown from the stage. He has a Tommy Chong beard.
“We can’t just be dismissed anymore as total stoners and that makes me happy, as a total stoner,” says Brown, who envisioned Lift & Co. as a marijuana forum and acknowledges leaving money on the table to work for the Feds. (He compares his fiduciary sacrifice to Elvis joining the army.) He seems sincere in wanting to affect policy. Pretty sincere in his feelings for Lift & Co. “We’ll find a happy medium between corporate and the old guard. I don’t think anyone’s being pushed out,” says Brown, 41. “Look where we are with cannabis in this country, in the world — this is much different than hippies smoking a joint.”
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About a kilometre away from the Expo, the country’s most famous hippie is smoking a joint. “Marijuana wasn’t invented by men in suits,” says Jodie Emery, whose headquarters on West Hastings Street take up three floors of an old brownstone and feel like entering Haight Ashbury in ’68. You expect to see Jerry Garcia on the couch. “We used to smoke at expos, and it was a beautiful thing. It’s the way it should be.”
Emery is a cannabis pioneer on probation with a $195,000 fine to pay to the government, and she was banned for two years in December from operating a marijuana dispensary. Alongside her husband, Marc, who opened the first Cannabis Culture in Vancouver in 1994 and sold High Times and seeds — and has also been hit with a $195,000 fine — Emery, 33, worries she’s being erased in the new world of weed. “I don’t know what’s being legalized except the ability of a few big companies, ex-cops, and politicians to make a lot of money,” she says between pulls of her joint. “I see these so-called weed people congratulating each other all day long on Twitter and I’m scared that what’s actually coming are business cartels with government assistance doing horrible things.”
Emery was busted for trafficking, and the last bastion of recreational marijuana laws to be executed is distribution. Olaru told me that he has millionaire friends who’ve since gotten out of the dispensary business who were making as much as $30,000 a day. Emery herself charged $25,000 for a Cannabis Culture dispensary franchise, plus $3,000 a month. Last year, she ran 20 dispensaries and received an additional 300 requests. Regardless of what happens in the future, and each province seems to have its own ideas with regards to the public vs. private approach to sales (Alberta is private, B.C. is a mix, and Ontario, whether it’s Doug Ford or Kathleen Wynne at the helm, seems up in the air), the grey market world of dispensaries, like the hippies, feels poised to retreat back into the underground.
Will Stewart left his job in March as a managing director of Navigator, a government relations and crisis management firm, to become a VP at Hiku, a publicly traded company that owns a portfolio of “luxury” cannabis brands. Stewart thinks the government wants to wipe out the grey market. He just questions its current summertime plans.“Toronto currently has 100-odd dispensary storefronts, and the current legal plan is to open 40 marijuana distribution centres across the entire province of Ontario. Even if 25 per cent are in Toronto, that’s still 10 stores as opposed to 100,” Stewart says. “Legalization done wrong will enhance the black market. Like so much in this sector, lots of things are yet to be determined. Obviously that adds to the attention the sector is receiving and makes this an unusual, exciting time.”
•••
Times are certainly unusual for Matei Olaru. He counts his father — who, while teaching in Romania, imported concave mirrors for parking garages and had a business selling gumball machines — as his moral compass and guiding light. “He had side hustles ever since I can remember,” says Olaru, in an interview in his Toronto office, a three-floor townhouse modelled after a tech startup right down to the beer, pizza, and freely roaming dog. Olaru got involved with Lift & Co. in the summer of 2015 while still working on Bay Street. He did market research on cannabis for his firm, made good investments and liked that Lift & Co. didn’t touch any marijuana plants. The value he saw in the company was in the sector and the brand. “I didn’t know what the company would be, but I knew a brand in the cannabis space would be valuable. I knew whoever was going to be first to market in medical marijuana would be first to market in recreational, and whoever does that is going to be filthy rich and have a great time.”
After being ignored by VCs in Toronto, Olaru raised $3 million in New York. “I said, ‘You want to give me millions at once. This is what you want to do.’ And they did.”
This new economy has created strange bedfellows. Julian Fantino, a former Toronto police chief who once compared legalizing marijuana to legalizing murder, has, alongside an RCMP deputy commissioner, launched Aleafia Total Health Network, a medical marijuana brand. Will Stewart’s new partner at Hiku is Joe Mimran, the man behind fashion brands Club Monaco and Joe Fresh. In the real estate market, there’s not enough space to house all of the warehouses needed to hydroponically grow Canadian weed and the depressed retail market is about to get a huge hit, the good kind, from legalized pot shops — stores planned by growers like Canopy Growth that pay careful attention to design. More Pink Tartan, less Pink Floyd. It goes on. Members of the Tragically Hip have had their stake in Newstrike, which owns medical and recreational marijuana brands and high-tech grow ops, valued at $39 million, and our man in Newfoundland, Bond Rideout, is looking to hire 40 people and produce 500 pounds of marijuana every two weeks out of his old fish plant. Times they are a-changin’.
Edibles are coming. Marijuana in drinks. Barely anybody young and successful even smokes weed, instead favouring odourless vaporizer pens and extract oils. When the Lift & Co. guys finished at the Expo, they ran into a woman in their hotel elevator. They asked her to guess what they did. The woman thought that they skied. This is taken as a point of pride: a marijuana image that makes people want to invest. Of course, Lift & Co.’s planned public offering could turn out to be bubkes. Matei Olaru could be about to launch a wallpaper stock and his company could turn out to be the next Maricann. His chief executive officer from Indigo hasn’t yet put his kid in private school and the Lift & Co. office doesn’t yet have a campus with free food, a masseuse, or a gym. Still, on the night of January 24, it took him only 30 minutes to raise his million dollars. Olaru doesn’t remember whether or not he was stoned that night. But there’s no doubt he’s enjoying his high.
“One guy alone wanted to send me a million dollars. ‘Hi, thank you, but I can’t give it all to you,’” Olaru says, with a wink and a grin. “People love the excitement of our industry. Fuck what I’m doing. This looks like more fun.”
