“He’s a risk-taker. It surprises people,” says Andrew Leslie, adding that Trudeau’s team in charge of the file, Jody Wilson-Raybould at Justice, Jane Philpott at Health, and Bill Blair, the former head of Toronto’s police force, heading the cannabis task force, covered the sector with the Liberal’s best minds. “Justin Trudeau has a switch in him, and when it’s activated, as it was with marijuana, he goes all in,” says Leslie. “It’s impressive.”
Justin Trudeau defeated Stephen Harper in the Canadian federal election on October 19, 2015. Legalizing marijuana was a first-term priority. Anne McLellan, former minister of justice and former minister of health, was appointed by Trudeau’s newly formed cannabis task force to lead the revolution. She still had never tried cannabis. But for a second time she was tasked with overhauling her country’s cannabis laws. “I hadn’t thought much about cannabis other than seeing developments happening, but I got this call: ‘Anne, we’d like you to lead our task force.’ My initial response was ‘I’m not the right person. I keep telling you guys.’”
McLellan had been on the enforcement side of the cannabis file and, though her view had swayed toward legalizing pot — like Andrew Leslie, she had no moral qualms with the concept — despite overseeing both the MMAR and MMPR laws, she still had no personal connection to the plant. McLellan is the Forrest Gump of weed: by accident, she keeps showing up in pot history. She says that by the time she accepted the appointment, legalization was a fait accompli.
“Mr. Trudeau made the promise of legalization in November 2015 and wanted that promise delivered by the election in 2019,” McLellan says. Her job was to figure out how to turn the MMPR laws into a system through which Canadians could get pot gummies in the same way they got light beer.
Hilary Black, now working at Canopy after Bedrocan’s acquisition by Bruce Linton’s company, helped McLellan meet with a vast array of people and organizations on both sides of the law, including police chiefs, cannabis activists, Indigenous Elders, and the Canadian Medical Association, which wanted to end Canada’s medical marijuana program and have all patients consume their cannabis recreationally. Black thought the medical program needed to be saved. People like Terry Parker who used pot to fight epilepsy shouldn’t pay a tax on their medicine. Pot should be legal just like wine, but for soldiers smoking MedReleaf bud to combat PTSD, it was not recreational. It was important to Black that the task force understand how marijuana could be both things.
Meanwhile, in Black’s activist circles, Canopy — the biggest pot company in the world — represented the very worst of corporate marijuana. “Working with Canopy is like working with the devil,” read one typically brutal tweet. Jodie Giesz-Ramsay (formerly Jodie Emery) took to calling the company Canopy Gross. Activists barred from the industry heard of Rifici’s Ottawa connections and the incredible cannabis market caps, tried their terrible weed, and no longer saw themselves reflected in the culture they loved. Rosie Rowbotham said, “What the fuck had these rich kids ever done for the culture?”
Hilary Black, meanwhile, defended Linton’s company — and thus government weed — because she believed government weed was better with activists inside the corporate boardrooms.
“We circled the wagons around the task force and made them consult patients with the Canadian AIDS Society [and] Canada Arthritis Society, and Anne really did meet the patients,” says Black. “She’d never seen cannabis work directly as medicine, but I was in the room with her and she’s hearing from a twenty-year homicide detective who, from PTSD, lost his family and lost [his] house. He had serious psychiatric issues, he told Anne McLellan, and had his life saved by cannabis.”
McLellan says that, as important as the cannabis file was to her prime minister, she was granted autonomy. “I made it clear: if I was going to do this, I was in charge,” she says. She had five months for her task force to render their verdict on what the Cannabis Act should include. “Shows what you can do when you put your mind to something,” McLellan tells me. “Marijuana produced the fastest task force in Canadian history for such a major public policy change.”
That major policy change — the end of cannabis prohibition — determined that provinces would decide their own approaches to point of sales and distribution and that the edible market wouldn’t begin on day one of legal weed. There was a possession cap of 30 grams of legal marijuana per individual, and all attempts at advertising cannabis would be banned. Cannabis, with regard to marketing, would be regulated like tobacco, not spirits or beer. McLellan neither expunged cannabis convictions from people with marijuana arrests nor got rid of the medical program.
While legalization wound its way through the government, illegal cannabis wound its way through the streets. First in Vancouver and then in Montreal and Toronto, underground retail dispensaries began popping up around the country when Trudeau took office. It was big business. It was brazen. It was stores selling weed and edibles in plain sight, despite pot still being against the law, and the police, by and large, leaving these storefront weed shops alone, as they had with the original medical dispensaries in Vancouver.
Some illegal operators even franchised. Marc Emery and Jodie Giesz-Ramsay, who had maintained their spokesperson status through the years, had a chain called Cannabis Culture that operated nineteen illegal weed stores across Ontario, BC, and Quebec. They had now the type of business that legalization would usher in: shops where you could buy marijuana and marijuana products. None of it was licensed, and the pot (and hash and edibles, but not mushrooms or coke) for sale was outside the Health Canada system. You couldn’t buy Canopy weed at Cannabis Culture. But Marc and Jodie had a name brand, and sold their Cannabis Culture naming rights to entrepreneurial, risk-taking shop owners for $25,000.
With legalization coming, cannabis sellers concluded that they would no longer be arrested for selling pot. If Jodie and Marc could do it, why couldn’t they? Clusters of illegal pot shops — places where dogs roamed freely and strains were distributed in film canisters and Ziploc bags — erected sandwich boards on the sidewalk, advertising discounted pounds. The pot was untested. The stores were unlicensed. Rumours circulated that a shop could bring in more than an untaxed million a week. The weed was really good.
“This is fucking batshit crazy,” says Amy Weinstein, who worked at one of Toronto’s first grey market pot shops in 2016. She was twenty-four years old and had just spent the summer following Phish on tour. To Weinstein, the shops were a natural stop along the path of legalization, and she figured the operation she was running would be grandfathered into the legal market for the price of a licensing fee, which is what ultimately happened in Vancouver. Instead, the illegal dispensary system in Toronto vigorously grew from three shops to thirty and then, just before a huge police bust in May 2016 dubbed Project Claudia, to more than one hundred illegal stores openly selling illegal weed. On the streets, it was hard to know that the Cannabis Act had not passed yet. It was hard to know that these stores were against the law. Some people, however, knew. The pot stores were being robbed. Criminals, even pre-legalization marijuana criminals, couldn’t call the police.
It was all very chaotic and another of marijuana’s famous grey zones, because it became common practice for an illegal pot shop to be shuttered by the police one day only to reopen the next.
Dealer’s Choice: Illegal dispensary weed. A cop in Toronto would confiscate then consume an edible from a store like this and later call for backup when he found himself up a tree.
“I couldn’t believe what I became involved with,” Weinstein says, because she was an activist hippie. But the culture was pivoting from activists to gangsters to bankers to some kind of weird amalgamation of all three. Even the police couldn’t tell who was who. Hilary Black sold pot at the BC Compassion Club from growers she knew. The new dispensaries, mostly, were more like parts of a criminal syndicate, says Weinstein. Before Project Claudia, when a shop got busted, it wasn’t rare for police to find, in addition to cash and weed, guns and hard drugs.
The climate lent itself to lawlessness, as drugs always do. The whole legalization gambit was designed to create a regulated system. And yet, when there were four weed stores between my house on the west side of Toronto and my daughter’s daycare two blocks away, it was hard to know what the rules were: for consumers, for companies, for cops. The shops were illegal, the marijuana wasn’t Health Canada tested, but there they were. There I was, buying pot — good pot, illegally — in broad daylight right beside another daycare dad.
Lorne Gertner had a different vision for his pot store. He’d been waiting his whole life to stake a claim in the cannabis movement and had invested in half of the legal pot companies before market data proved out if the product he loved would catch on in the mainstream. But he knew how to build a brand, was connected to the entire industry, and gave many of the first-wave founders money or, at the very least, connections or investment advice. His dream was to make the legal pot shops look like Apple stores, Lululemon boutiques. He believed that cannabis had to shed its stigma — the antithesis to what the current crop of pot shops had done — and that marijuana could be an upscale, curated experience. He wanted to do for pot what he had once done for his father’s line of women’s clothes.
“We would walk to work every day and pass by lineups outside these illegal dispensaries,” says Alan Gertner, Lorne’s son, who left Silicon Valley and Google to co-found, alongside his dad, a new retail concept. In 2016, father and son opened a boutique art shop called Tokyo Smoke on Adelaide Street in Toronto, dispensing coffee with panache, style, and design. Lorne wanted to mix marijuana with art and fashion and create a new look for cannabis: bespoke, expensive, chic.
The thuggish, self-righteous hippies who went after Hilary also wanted Lorne’s head. Gertner says he received death threats when he introduced a $2,000 solid gold bong. In Toronto’s Kensington Market, windows of a legal, upscale pot store would later be smashed. It could be dangerous changing the value proposition of weed, and Tokyo Smoke generated a lot of attention, good and bad. Pot went from the business pages to the style pages, but even in this strange in-between time — when pot was illegal and yet everywhere — Gertner still couldn’t legally sell any of Bruce Linton’s marijuana. While he waited for the Cannabis Act to take effect, he sold double doubles surrounded by illegal weed stores.
The Godfather: Lorne Gertner, who invested in Prairie Plant Systems, helped launch Cronos Group and sold Tokyo Smoke to Canopy Growth for more than $500 million. Gertner first smoked pot in Jamaica in his teens.
“We were fascinated watching this experiment, but were excited to have our day in the future,” says Alan Gertner. His dad echoes the sentiment. Lorne says he was never tempted to sell illegal weed because he aimed to educate consumers about marijuana. He wanted Prime Minister Justin Trudeau to succeed — a mission he still believes in today. And for the legal market to succeed, eventually police would have to close the illegal shops because the black market pot would affect the legal companies’ bottom lines. Gertner trusted the process, smoked legal weed with his medical licence, and opened Tokyo Smoke stores in Manitoba and Toronto, before legalization. It helped that he was well capitalized.
“We believed legalization was going to happen,” says Gertner. “It’s where we parked everything.”
Chapter 8 Rolling
“Do I think we’re overvalued? Fuck no.”
Terry Booth
The Bedrocan deal and the birth of Canopy Growth helped kick off a flurry of public offerings, mergers, convertible debentures, and acquisitions — with market valuations based on narratives, not profit margins. Investment firms like the one run by Sean McNulty’s bosses at MMCAP — who’d turned away deals in the sector prior to the Canopy IPO — had a change of heart after Bruce’s IPO and Trudeau’s election promise.
Soon, retail investors wanted weed stocks on the public markets, which made bought deals easy money for investment firms. Michael Haines at Mettrum says he couldn’t play a round of golf without somebody wanting to make a deal. Pot went from “no can do” to “no can miss,” and it was retail investors, especially the pot-smoking ones, making the bulk of the trades. The Robinhood Market was fire. Pot stocks were liquid. Liquid stocks moved up in worth.
Canopy opened at around four dollars on the Toronto Stock Exchange on April 4, 2014. Bruce Linton says the IPO was the best publicity his company could receive. But it was more than that. It was good PR for the sector. Canopy, using the WEED ticker, was over eighteen dollars by the end of 2015. What Linton had promised Amanda Daley, the former sales rep from Pfizer, turned out to be true. Linton was a prognosticator. The Canopy cannabis vaults were still empty. The secret sauce was this: it didn’t matter. In a speculative economy, attention was more valuable than weed. But the investment banks weren’t really making investments. They were doing cannabis bought deals, selling their stock, and recycling the capital into another brand. In a sense, it was just as sketchy as the illegal pot stores. Illusions. Recycled capital is how Aphria, Aurora, and Cronos grew and also how a company could be worth over $1 billion and still have trouble making payroll. Value was much different than cash.
The number of patients in Canada’s medical cannabis system was increasing as the big pot companies prepared for recreational legalization. But product availability remained a problem, and so, while the licensed cannabis companies expanded their production facilities, Health Canada began expediting its licensing. The moat, slowly, was being drained, and young hustling entrepreneurs got their chance to enter the game.
Hydropothecary, Sébastien St-Louis’s company, submitted its licence request on July 13, 2013. It would be June 2015 before it was approved. The company received the first medical marijuana licence in Quebec. “Very quickly I learned the art of the possible,” St-Louis told me. He and his brother-in-law, Adam Miron, were originally going to be a small private company. They were green and they knew it; they had gumption and pride. “Neither of us come from wealth. My parents were teachers, very middle class. Nobody in my family knew how the stock market worked.”
When St-Louis arrived on Bay Street, he was in for an awakening: cannabis had grown. “Nobody was interested in a $10 million plan. ‘Do you have a $100 million plan?’ they asked me. I recalibrated quickly. ‘Yeah, I have one,’ I said. ‘Let’s go.’”
Terry Booth at Aurora Cannabis, the first Alberta-based licensed producer, emerged as a different kind of cannabis executive: rougher, brasher than Bruce Linton. Michael Haines and Trevor Fencott at Mettrum had cited paperwork as their superpower. Booth’s superpower would be volume. He wasn’t afraid to be impolite. He hadn’t grown up with a silver spoon; he had been an electrician. And from the beginning, studying the moves of Bruce Linton, Booth emerged as an executive hell-bent on liquidity and size. From greenhouses to hydroponic light companies, from dispensaries to rival weed brands, he bought something new every week, and his Canaccord bankers, especially Graham Saunders, legally milked this capitalist tool. In a sense, Booth was a vessel from which other people’s money could be made. Saunders was a master of convertible debentures, which are a financial tool for raising money. A debenture is an unsecured loan from a company — that is, it is not backed by any collateral — but it can be turned into stock shares in the company if the debt hasn’t been repaid at the agreed-upon time. In other words, it is a loan with a ticking time bomb attached. Saunders not only helped Booth at Aurora raise money, but also advised on his acquisitions, thus getting paid twice: as a financial adviser and taking commission on acquisition. Raising more money, buying more things, bigger things, selling more shares, and then doing it again and again.
It was the cocaine approach to building a company: aggressive short-term moves that felt good fast and produced results quickly. Acquisitions and rounds of investment boosted Aurora’s share price while million-dollar losses became normal, and rival weed brands were forced to follow Terry Booth or risk being left behind.
Out in Edmonton, Terry Booth thought the competition, who didn’t even smoke weed, was soft. He wasn’t intimidated by the black market, or by Bay Street, where he felt like he was looked down upon by the moneyed Toronto- and Vancouver-based nucleus of weed. He didn’t care. It was motivation. Starving for power and recognition, Booth — foul-mouthed, lavish, a player-coach who really did care for the plant — was an arsonist: loved by his employees, tearing down tradition with glee. In 2013, Booth invested $3 million to start Aurora. Three years later, Yosemite Sam had nine hundred employees. Aurora was worth $5.2 billion in 2016, with less than $50 million in revenue; according to the Globe, $779 million came from investors. Terry’s plan, influenced by Bruce Linton and thirsty tier-three bankers, was working — his market cap was growing — and he opened production facilities in Quebec, Ontario, Alberta, and Saskatchewan.
Investment bankers like Saunders and retail investors online were pumping his stock, and that made his company valuable, even if it couldn’t quite do what it was supposed to: grow good pot. Booth says that whenever any of the investment bankers wanted to raise money for Aurora, he was in. He sat back, appetite growing, and accepted their phone calls. “Take the fucking money” was his approach to growing the company at the time, he tells me in the back seat of his Rolls-Royce in Las Vegas. The more money he spent, the more Aurora was worth. Booth cursed in his emails, and at cannabis expos he drank with fans at the bar, and onstage. He smoked pot, threw lavish parties for Aurora employees, and signed back-of-the-envelope deals for a million bucks. It was not a time for due diligence. At a 4.20 celebration in Vancouver, Booth, the CEO of a billion-dollar company, took an edible that somebody gave him. Edibles were illegal. Booth didn’t know the person. Drinking, smoking, travelling, spending millions, and taking toots — he was having the time of his life.