Trading on a major exchange can give a company access to a significant pool of investors, meaning easier access to funding and expedited growth. That's why listing on an exchange like the NYSE or NASDAQ is the goal for many pot stocks. However, with marijuana still illegal at the federal level in the U.S., cannabis companies operating in the U.S. are in violation of federal laws, meaning they cannot trade on either of those major exchanges.
Canada-based cannabis companies have been able to avoid that problem because pot is legal in Canada. Unfortunately, with many pot stocks struggling and the Horizons Marijuana Life Sciences ETF (OTC: HMLSF) down more than 30% this year, some of them face a new problem -- getting delisted from the NYSE.
One of the ways a company can run into trouble on the NYSE is if its share price drops below $1 for 30 trading days. If this happens, the exchange sends a warning requiring the company to make a plan for bringing its share price back above $1. That's what happened to Rite Aid (NYSE: RAD) in early 2019, when its stock was trading at $0.75 and was averaging a price of less than $1 over the past month. The company ended up staying on the exchange, but in order to do so, it made a 1:20 reverse stock split. The move instantly pushed the stock above $1.