If you’re wondering why your Aphria (APH.T) stock lost 13.8% today, you can blame the TSX – again.

The Toronto Stock Exchange will contact all companies that cultivate, distribute or possess marijuana, or offer services related to the drug in any jurisdiction, by the end of the year. If they’re found to be in violation of U.S. federal law, they could ultimately be delisted, said Ungad Chadda, president of capital formation for equity capital markets at TMX Group Ltd., the parent company for bourses Toronto Stock Exchange and TSX Venture Exchange. “There may be issuers on our market that are not in compliance with the requirements. We will only come to find that out through the process of our review,” Chadda said in a briefing with reporters at TMX’s offices in Toronto. “If you’re violating federal law, you’re out.”

Aphria had literally just announced an $80 million bought deal financing when the TMX news dropped, causing the share price to drop from $7.92 to $6.86.

The financing price had been set at $7.25.

This was not a good day for Aphria, and, if we’re being honest, Canopy Growth Corp (WEED.T) didn’t help, with a lengthy ‘tut tut’ news release that seemed to scold competitors for being naughty.

“Canopy Growth believes that operating and investing in markets where such activity is federally illegal puts the company at risk of prosecution, puts at risk its ability to operate freely, and potentially could jeopardize its listing on major exchanges now and in the future, limiting access to capital from reputable U.S.-based funds,” it said.

We get it, Canopy, you’re the teacher’s favourite.

While Canopy Growth has a number of partnerships with U.S.-based companies that may themselves participate in the U.S. cannabis market [emphasis mine], these relationships are licensing relationships that see intellectual property developed in the United States brought into Canada and in no manner involve Canopy Growth in any U.S. activities respecting cannabis. The company is confident that this staff notice will have no impact on its operations or listing on the TSX or the S&P TSX Composite Indexes where Canopy Growth common shares are listed.

Maybe. Maybe. But maybe not. Canopy is sending money to companies that, federally, break the law. Whether that’s for IP or canned tomatoes, they’re financing those companies and could be pushed into the same boat as others.

Canopy stock dropped $0.61 to $12.52 on the news.

Perhaps that’s because, while Canopy swears it’s on the side of the angels, the regulators are keeping their options open on who’s a bad boy.

To reiterate:

The Toronto Stock Exchange will contact all companies that cultivate, distribute or possess marijuana, or offer services related to the drug in any jurisdiction, by the end of the year.

‘Offer services’ is pretty broad, and that’s something Aphria has a problem with:

“The objective application of such staff notice by the TSX to any entity engaging in activities related to the cultivation, distribution or possession of marijuana in the U.S. or entities engaging in ancillary services activities may prove to be challenging in determining actual compliance with such guidance,” the company said in a statement.

This is not the first time TMX has cut a swathe through the marijuana sector by wondering aloud if it might start shoving party guests over the balcony. The last time they talked about delisting companies it cratered weed stocks across the board for a few days.

Of course, while the exchange could set delisting plans in place, they could also not do so. Because, frankly, any chance the TSX is going to delist Aphria, or anyone else on their exchange (or even realistically threaten to do so) who got their listing while they were already doing business in the US, because they’re legally investing in a legal business in a US state where medical marijuana is legal, is ridiculously unlikely.

And if it happened, lawsuits would crash down on them. They know this.

Rather, what the exchange is hoping to do is make US authorities happy that it’s carrying their water, while also hoping nobody pushes it into a corner and forces actual action.

So Aphria takes a hit, because it has a Florida-based (legal) investment, and others doing leaseback deals or financing grow buildouts or investing in dispensaries or CBD products get to live in fear while investors shy away from them – for a week or so, anyway.

And so it goes:

EMC.V down 15.8%

APH.T down 13.4%

MWG.V down 12%

DOJA.V down 11.2%

LDS.C down 10.9%

One of the few upward movers today was Matica Enterprises (MMJ.C), which has no US investments at all, and thus became a safe place to park cash. It was up 4.8%. Oddly, Marapharm (MDM.C), which is nothing but US weed assets, was slightly up on the day. But those two were outliers.

Emblem (EMC.V) was literally right in the middle of a $25 million bought deal when the news dropped, and by the end of the day, that stock was shredded by over 15%, dropping from $1.96 to $1.65, ten cents below the financing price.

All of Lifestyle Delivery Systems (LDS.C) business and assets are California-based, as well as fully licensed and permitted on a state and civic level, so how it’s supposed to divest itself of anything that’s ‘federally illegal’ is anyone’s guess. Ditto Maple Leaf Green World (MGX.V) which has operations in the US, and Vodis (VP.C), which has financed a grow facility in Washington State but operates as a landlord, not an operator.

CannaRoyalty (CRZ.C), which has a ton of US exposure, managed to both not fluctuate much in share price (down 1.3%) and release a newser that supports ‘clarification’ that later came from Canadian Securities Administrators (CSA) – as opposed to the TSX – that suggested everything will be fine as long as companies ‘tell investors about certain risks when they invest south of the border — where issuers with marijuana-related activities in the U.S. assume certain risks due to conflicting state and federal laws.’

“With this Notice, the CSA has removed uncertainty for investors and paved a concrete path forward for companies like CannaRoyalty,” said Marc Lustig, CEO of CannaRoyalty. “CannaRoyalty has continuously provided an extensive level of disclosure and we are appreciative of the CSA’s endorsement of the disclosure-forward approach the Company has taken since its public launch. We commend the CSA for its balanced and transparent approach to this topic and we expect this guidance to eliminate any persisting rumours regarding the Canadian regulators’ view of issuers with U.S. cannabis assets.”

That’s some impressive judo, turning what to most was a shot across the bow by the TSX into a ‘we’re all good, we disclose up and down, we’re fine, nothing to see here’ backflip into the friendlier CSA note.

Invictus MD Strategies (IMH.V) followed a similar path:

“There are a number of authorities across the country that are developing policies and regulations to support the successful legalization of recreational cannabis. Invictus MD is monitoring these jurisdictions and will engage officials when necessary,” stated Dan Kriznic, chairman and chief executive officer of Invictus MD.

So now we have a situation where the TSX is playing grumpy, the CSA is playing peacemaker’, and the companies being batted around like mice in a cat shelter are just hoping that investors can see through the haze of bureaucratic battle and not freak out too much.

For its part, Aphria said everything it needed to in order to lay out a potential legal defense when it said in its news release:

“As disclosed in August of this year, Aphria’s common shares have traded on the TSX and previously the TSX Venture Exchange for almost three years during which time the company has raised over $216-million from investors by way of five offerings by short-form prospectus. Aphria has had marijuana-related activities in the U.S. since 2015, including its Copperstate transaction, which was approved by the TSX Venture Exchange prior to its closing.

In other words, “Come at me, bruh.”

The TSX does this. In the early days of the cannabis boom, the TSX threatened all manner of company with change of business halts if they talked too loudly about cannabis, so for a good year, companies spoke in code – which didn’t help investors in any way, shape, or form.

Toronto, Ontario –February 12, 2014 – Satori Resources Inc. announces that management intends to evaluate new projects, including, but not limited to, opportunities in agriculture, medical, technology, finance, and resources. At this time, no transactions are in place, nor is there any assurance that a new project will be concluded in the future.

Remember that? Remember companies on the TSX Venture being chased to the CSE, giving that nascent exchange a massive boost that helped it become legit competition to the bigger boards?

Well here we are, three years down the road, and the TSX still wants to swat away money because it’s scared of ‘marihuana’, and it’s still giving investors the frighties right in the middle of a good run.

— Chris Parry

FULL DISCLOSURE: Some of the companies mentioned in this article, namely Lifestyle Delivery Systems, DOJA, and Invictus MD Strategies, are Equity.Guru marketing clients, and the author owns stock in DOJA.

NB: Doja Cannabis (“DOJA”) announced a name and symbol change on January 30th, 2018 as a result of its merger with TS Brandco Holdings Inc. (“Tokyo Smoke”). Effective 31 January 2018, the company trades as Hiku Brands under the ticker symbol HIKU.C