by Brian Mahany
Hats off to Investment News for running a story on marijuana industry start ups going public. With 15 states already legalizing medical marijuana, no one should be surprised that someone would consider selling stock to fund marijuana related businesses.
The article quotes a former Morgan Stanley investment banker, Derek Peterson, who sells trailers set up as marijuana grow rooms on wheels. Ventilation, grow lights, humidity, water and nutrient delivery systems are all part of the product. Show up with $30,000 and a truck with a trailer hitch and you can instantly be in the marijuana business. The only things not included are the plants.
Another marijuana service business, General Cannabis, seeks to raise $10.5 million in an initial public offering (“IPO”). I thought the IPO might have been an idealistic goal or dream of General Cannabis until I checked the SEC’s website. Sure enough, on March 1st, General Cannabis filed a registration statement with the SEC.
There is a certain amount of irony here. Although several states now permit the use of marijuana for medicinal reasons, the possession or sale of pot remains a crime under federal law. Yet General Cannabis has filed a registration statement with the feds to go public with a marijuana industry servicing business.
Even more amazing, General Cannabis reported to the government that they had $7.7 million in revenue last year.
Obviously, investment in the marijuana industry carries some risk. Although 15 states have “legalized” marijuana in limited circumstances, Montana just repealed their medical marijuana law. A wave of newly formed Republican governors and legislators puts some of those other medical marijuana laws at risk as well.
Is this the start of something big or will the industry just go to “pot”? I am not sure but don’t expect mainstream broker dealers to be hawking marijuana stocks anytime soon.
Mahany & Ertl is a full service boutique law firm that concentrates in fraud recovery, helping clients with tax problems and defending those accused of white-collar crimes. If you received bad investment advice from a stockbroker, lawyer or accountant, call us. We may be able to help you get your money back. Our securities fraud lawyers can help with FINRA arbitration cases as well. Contact Brian Mahany directly at (414) 704-6731 for more details.