Marijuana Companies Funding

This assignment analyzes the surge in funding for Canadian marijuana companies in 2017, highlighting the role of smaller brokers who capitalized on the trend. It discusses how these brokers secured deals through equity offerings and warrants, often at a lower cost compared to larger banks. The document also explores the potential impact of established players like BMO entering the market and predicts continued growth in the financing pipeline for marijuana companies.

Running head: FINANCE
Finance
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

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Table of Contents
Review and discussion of article 1:.................................................................................................2
Review and discussion of article 2:.................................................................................................3
References:......................................................................................................................................4
Appendix:........................................................................................................................................5

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Review and discussion of article 1:
The first article that has been chosen to fit the purpose of this assignment is “Fidelity
Launches Fidelity Investment Grade Total Bond Fund”. Fidelity is a top Canadian investment
firm and this particular bond aims to provide steady income flow and the potential for capital
appreciation in the context of the Canadian investors. With the changing market of fixed
income, the fund flexibility would enable the investors to be active in targeting various sources
of return. This income strategy offers the following:
 Flexibility in investment providing exposure to the wider opportunity set inherent in the
fixed income market of USA
 Tactical management like sector rotation, asset allocation and positioning of yield curve
(Moore et al., 2018)
 Mitigation of downside risk and identification of opportunities for delivering competitive
overall returns
 The diversification of portfolio, in which the fund could be included in the current core
allocation in the form of a complement to conventional fixed income for client portfolios.
It has been identified from the article that Fidelity is involved in managing $136 billion in
institutional assets and mutual funds. This takes into account $37.5 billion in assets for
institutional clients. These comprise of corporate and public defined benefit pension,
endowments, sub-advised programs, foundations, endowments and the other corporate assets on
the clients’ behalf (Andonov, Eichholtz & Kok, 2015). Thus, the Canadian investors are
provided with an overall range of global, domestic and income-oriented mutual funds along with
asset allocation and the high program of net worth.

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Review and discussion of article 2:
The second article that has been selected for meeting the purpose of this assignment is
“Canada's small financial firms get buzz from weed stocks”. This article is related to the
financial markets prevailing in the Canadian market. The investors have placed bets that the
smaller financial companies of Canada would experience an increase in revenues after they
helped in funding the marijuana firms ahead of the planned legalisation of the drug of the nation
in the year. The Canadian weed firms have offered equities, which are nearly $1 billion in 2017
and two-thirds are generated in the final quarter of 2017 (Business.financialpost.com, 2018).
From the article, it has been identified that the capital markets of BMO have risen, which
have helped in raising the revenue of Canoby Growth Corporation to $161.3 million. This
denotes that the reputed brokers might take some market share from the smaller brokers.
However, the smaller brokers have taken early lead in banking relationships and funding
research with the marijuana companies after larger rivals have entered the industry. Moreover,
the investors could benefit the small brokers, since the former trade in pot stocks in the
secondary market as well as the increase in value of the warrants hold (Busch, Bauer & Orlitzky,
2016). However, there is no clarity about the participation of the biggest Canadian banks in the
market. Hence, it could be inferred that the smaller Canadian brokers would be benefitted
immensely in the financial market.

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References:
Andonov, A., Eichholtz, P., & Kok, N. (2015). Intermediated investment management in private
markets: Evidence from pension fund investments in real estate. Journal of Financial
Markets, 22, 73-103.
Busch, T., Bauer, R., & Orlitzky, M. (2016). Sustainable development and financial markets: Old
paths and new avenues. Business & Society, 55(3), 303-329.
Business.financialpost.com. (2018). Financial Post. Retrieved 29 January 2018, from
http://business.financialpost.com/investing/canadas-small-financial-firms-get-buzz-from-
weed-stocks
Moore, J., Strickland, R., Moore, J., Moore, J., & Plage, M. (2018). Fidelity Launches Fidelity
Investment Grade Total Bond Fund. Newswire.ca. Retrieved 29 January 2018, from
https://www.newswire.ca/news-releases/fidelity-launches-fidelity-investment-grade-total-
bond-fund-671088653.html

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Appendix:
Article 1: Fidelity Launches Fidelity Investment Grade Total Bond Fund
TORONTO, Jan. 24, 2018 /CNW/ - Fidelity Investments Canada ULC, one of Canada's top
investment management firms, today launched Fidelity Investment Grade Total Bond Fund
managed by veteran fixed income portfolio managers Jeff Moore and Michael Plage.
Fidelity Investment Grade Total Bond Fund is a flexible fixed income strategy that aims to
provide a steady flow of income and the potential for capital appreciation for Canadian investors.
Built for today's constantly changing fixed income markets, the flexibility of this fund allows
Jeff and Michael to be active and nimble in targeting multiple sources of return from a full
spectrum of issuers in the U.S. and around the world, with an emphasis on investment grade
fixed income securities. A currency neutral version of Fidelity Investment Grade Total Bond
Fund is also available.
In managing this fund, Jeff and Michael can leverage Fidelity's extensive research resources
around the world, proprietary credit rating system and unique approach of collaborating across
both fixed income and equity research teams. This allows Jeff and Michael to develop a "360
degree" view and deep insights into the wide set of issuers and securities in which they intend to
invest.
"Given low government bond yields and the prospect of rising interest rates, investors needs a
fixed income solution that is flexible and can target multiple sources of income from issuers
around the world," said Rob Strickland, President, Fidelity Investments Canada ULC. "That is
why we are proud to launch the Fidelity Investment Grade Total Bond, which is designed to
meet this need and draws on the experience of Jeff and Michael and Fidelity's global resources."

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Fidelity Investment Grade Total Bond Fund
Fidelity Investment Grate Total Bond Fund is a fixed-income strategy that offers the following:
Investment flexibility: Provides exposure to the broad opportunity set available in the U.S. fixed
income market, yet has the flexibility to invest around the world as global market conditions
change.
Tactical management: The portfolio managers can utilize a variety of tactical tools, including
asset allocation, sector rotation, security selection, and yield curve positioning.
Risk mitigation: Combines Fidelity's top-down asset allocation and bottom-up security selection
expertise with the aim of mitigating downside risk and identifying opportunities in order to
deliver competitive total returns.
Portfolio diversification: The Fund can be added to an existing core allocation as a complement
to traditional fixed income or as a diversifier for client portfolios.
Access to Fidelity's fixed income portfolio management expertise and resources: Leverages
Fidelity's deep research resources, proprietary credit rating system and unique approach of
collaborating across both fixed income and equity research teams.
Portfolio Manager Jeff Moore
Jeff Moore is a portfolio manager for Fidelity Investments.
He is co-portfolio manager for Fidelity Multi-Sector Bond Fund, Fidelity Global Bond Fund,
Fidelity Tactical Fixed Income Fund and Fidelity Premium Tactical Fixed Income Private Pool,
and manages fixed-income subportfolios for Fidelity Global Asset Allocation Fund, Fidelity

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Global Dividend Fund, Fidelity Global Monthly Income Fund, Fidelity NorthStar® Balanced
Fund and Fidelity U.S. Monthly Income Fund.
Jeff joined Fidelity as an analyst in 1995 and began managing portfolios in 2000. He was also a
fixed-income analyst assigned to several sectors, including sovereign debt, energy, REITs,
Yankee banks and Canada.
Before joining the firm, Jeff was a credit analyst following Canadian provincial, municipal and
government debt for Dominion Bond Rating Service. From 1990 to 1994, he served as a
financial analyst in the financial markets analysis and economic development groups for the
Department of Finance of the Canadian government. He has been in the industry since 1990.
Jeff earned an MA in economics from the University of Waterloo and a BA (Honours) in
economics from the University of Western Ontario. He is a Chartered Financial Analyst (CFA)
charterholder.
Portfolio Manager Michael Plage
Michael Plage is a portfolio manager at Fidelity Investments.
He is co-portfolio manager for Fidelity Multi-Sector Bond Fund, and the fixed-income
subportfolio for Fidelity NorthStar® Balanced Fund, as well as Fidelity U.S. Monthly Income
Fund for Canadian investors. He also manages various retail and institutional fixed-income
portfolios for the Core, Core Plus and Tactical Bond strategies available to U.S. investors.
Before assuming his current responsibilities, Michael managed institutional and retail fixed-
income portfolios for credit strategies, including high yield. Previously, he worked as a fixed-

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income trader from 2005 to 2009. Before joining Fidelity in 2005, he was a trader at Travelers
Insurance (Citigroup) from 1997 to 2005. He has been in the investments industry since 1997.
Michael earned a BSc in management from the University of South Carolina and an MBA in
finance from the University of Connecticut. Michael is also a Chartered Financial Analyst (CFA)
charterholder.
Fidelity Investments Canada ULC
Fidelity Investments Canada ULC manages a total of $136 billion in mutual fund and
institutional assets. This includes $37.5 billion in assets for institutional clients including public
and corporate defined benefit pension and defined contributions plans, sub-advised programs,
endowments, foundations and other corporate assets on behalf of clients across Canada as
at November 30, 2017.
Fidelity Investments Canada ULC provides Canadian investors a full range of domestic,
international and income oriented mutual funds, as well as asset allocation and managed
solutions and the high net worth program, the Fidelity Private Investment Program. Fidelity
Funds are available through a number of advice-based distribution channels including financial
planners, investment dealers, banks, and insurance companies.

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Article 2: Canada's small financial firms get buzz from weed stocks
TORONTO — Investors are betting Canada’s smaller financial firms could see a jump in
revenues after they helped fund marijuana companies ahead of the country’s planned legalization
of the drug this year.
Equity offerings by Canadian weed companies tripled to a record high of nearly US$1 billion in
2017, with nearly two-thirds of that in the final quarter, data from Thomson Reuters showed.
Much of the issuance for pot producers has been led by small independent brokers, such as
Canaccord Genuity Group Inc. In addition to being paid underwriting fees, the brokers can
sometimes receive warrants, which could have become significantly more valuable after a surge
in the marijuana companies’ stock, market players said.
 CanniMed, Aurora, Newstrike shares rise on speculation of three-way deal to create
Canada’s biggest pot producer
 The week in marijuana deals: Nuuvera’s dolce vita, Shoppers shops around, a branding
merger
 Most provinces yet to lock up marijuana supply as clock ticks toward legalization
BMO Capital Markets’ move last week to help Canopy Growth Corp, Canada’s biggest cannabis
producer, raise $200.7 million (US$161.3 million) was a sign that established brokers were likely
to take some market share away from the smaller brokers.
But smaller players have an early lead in funding research and banking relationships with
marijuana companies after bigger, bank-owned rivals saw the industry as too risky or bad for
their reputations, market players said.

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“The smaller independent brokers are fairly opportunistic and good at jumping on trends, so
crazed market activity in anything to do with cryptocurrency and marijuana plays right into that
ability,” said Matt Skipp, president of SW8 Asset Management.
POT KICK
Canada’s plans to legalize pot for recreational use in mid 2018 would make it the first Group of
Seven country to allow the drug nationwide and the second in the world after Uruguay. Shares of
Canaccord and another small cap broker GMP Capital Inc have surged as much as 67 per cent
and 110 per cent respectively since November, when marijuana stocks started to take off. GMP
has also helped raise money for miners of digital currencies, which have also soared in recent
months.
In addition to increased underwriting in the most recent quarter, small brokers could also have
benefited from the investor trading of pot stocks in the secondary market as well as the potential
increase in value of any warrants they hold.
Compensating the underwriters with warrants can help lower the cost of financing for some pot
companies who are growing and short of cash, said Skipp.
An underwriting agreement for Aurora Cannabis Inc from October shows that Canaccord, the
lead underwriter, and other participating brokers were granted options that would give them the
right for a period of three years to purchase the shares of the company at the transaction’s
offering price, which was $3. Shares of Aurora were trading at around $14 on Monday.
“To the extent that you want to buy a business that is pretty transparent, with proper cash flows
and a business that you understand and like, some of these independent brokers could be a play

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on the kind of activity that has been going on,” said Diana Avigdor, head of trading at Barometer
Capital Management.
It remains unclear how many of Canada’s biggest banks will eventually participate in the market.
Those that do could target the more established producers, rather than the many smaller,
potentially riskier ones.
The 2018 financing pipeline has already got off to a brisk start, including the equity offering
from Canopy Growth and a $200-million issue of convertible debentures by Aurora Cannabis,
that was led by Canaccord.
“Obviously there is a healthy market here for companies that raise money,” said Vahan Ajamian,
an equity research analyst covering the cannabis sector at Beacon Securities Ltd. “I don’t see that
shrinking any time soon.”