The Business of Cannabis –
This is Not Your Parent’s High Times
Many of you have grown up as we did in the 60’s, 70’s, 80’s or even 90’s, when cannabis was commonly referred to as marijuana, maryjane or simply pot. It was associated with Woodstock, Bob Marley, Cheech and Chong, High Times Magazine, and Fast Times at Ridgemont High. Perhaps you may even remember an earlier time in which cannabis was propagandized and demonized, as in the 1936 movie Reefer Madness, a movie in which young teenagers are lured into purchasing marijuana from a couple living in sin and then through a gateway and ultimately down a dark path that leads to addiction, dark crimes, insanity, and even death. Well, as you all know now, the times they are a changin’, and cannabis has now been approved for medical use in over 25 states in the US, and legalized for recreational use in the states of Colorado, Washington, Oregon and Alaska. And it won’t stop there, as proposed legislative changes are taking place nearly every day.
There are a few things that make this industry very fascinating. First of all, of course, is the potential size of the market and industry. Secondly, from a legal perspective, there are unique issues related to the interplay and contradiction between Federal and State law. Thirdly, everywhere we go and whatever financial conferences we attend these days, there seems to be a buzz (pardon the pun) and excitement related to companies associated with this space. And lastly, for now, from a medical use perspective, we have never seen a medical product that is administered without regard to a particular dose, as in “take 2 of these and call me in the morning” or “take 1 every 6 hours for 7 days straight”. It is an anomaly.
Today, there is a burgeoning cannabis industry that some have referred to as “The Green Rush”. It is a growing tide spreading across the US, which in some ways harkens back to the end of prohibition or the way that the legalization of gay marriage has recently swept across many states of our nation. Perhaps more appropriately the issue of whether cannabis-related companies should or can be publicly listed and traded is more akin to the gambling industry, where federal and state laws are not in concert. A recent article published by the Washington Post cites to a report released by Greenwave Advisors, which it refers to as a “comprehensive research and financial analysis for the emerging legalized cannabis industry”. The article goes on to state that “…legal cannabis could be an industry with revenues of $35 billion by 2020 if cannabis is legalized at the federal level”. To put it further in perspective, this $35 billion figure represents more annual revenue than the NFL (currently $10 billion), and is roughly on par with current revenues for the newspaper publishing industry ($38 billion) and the confectionary industry ($34 billion). Thus, we are obviously talking about a potentially very big industry.
The historical uses of cannabis are well documented and many: cannabis has been used for medicine, food, fuel, paper, rope, maps, bricks, oil, paint, furniture and much more. In today’s market, in the states where cannabis has been legalized for recreational use, the primary focus of the market has become threefold, broken down into producers (or growers), processors (or labelers), and retailers. The secondary focus has become the many industries that have developed or are developing around those entities, such as real estate, agriculture, lighting, tourism, technology, research and development, e-commerce, banking and security (to name just a few).
Now once the foundation is set, combine the need and desire of entrepreneurs to raise money to fund their businesses or ideas in this space and you create a perfect storm. It is the interplay of the emerging business, fundraising and regulatory oversight which this Report is concerned. One of our primary focuses will be on companies considering ownership by individuals or entities outside of a small group in the legalized jurisdictions and will range to companies either considering to go public or that may have already crossed the divide and are public, listed and trading on the US capital markets (whether on a national securities exchange on the over-the-counter markets).
We have humbly set out to create a report that is intended to be a central place where readers can gather synthesized information about the regulatory state, development and emerging trends of this growing industry.
