Cannabis Law Group's Medical Marijuana Legal Blog
Cannabis Business Insight: Thinking of Taking Your Pot Shop Stock Public?
Once seemingly-impenetrable marijuana regulations loosening their grip across the globe. With that, California cannabis business and industry leaders are ramping up efforts to establish shops and services that are not just licensed, stocked and accessible, but that give them an edge on increasingly fierce competition. That means strategic locations, expanded delivery services, a diversified product line and experts as employees.
Cannabis stocks have risen sharply in recent years, and despite hesitation given that it remains a Schedule I narcotic, the trend is expected to continue through the Q3 and Q4 of 2019.
But cannabis business attorneys urge entrepreneurs to carefully consider the full picture before taking their stock public. The process is complex and expensive – and risky. That risk can pay off, but it’s imperative to first discuss your marijuana business plan with a qualified lawyer because surging forward without careful deliberation and sound reasoning.
There are some innate challenges to taking a company public, but there can be some big rewards too.
Accessing Capital is Prime Motivation for Cannabis Companies Going Public
In almost any other industry with high demand, secure product flow and high returns on investment, banks and investors would be falling over themselves to lend funds to new ventures. But then, cannabis has never been any other industry.
Unless the owner of a cannabis company is independently very wealthy, going public can sometimes be the only way to access the additional capital necessary to:
- Grow current operations
- Expand into new markets
- Reduce debt to ultimately boost performance
- Launch new lines of products
- Initiate a merger or acquisition.
Although some banks are growing more comfortable with the budding industry, cannabis companies have more options in terms of acquiring capital, but still not as many as would be ideal. If you’re looking to acquire more capital to take on one or more of these goals, a dedicated cannabis attorney can help review your legal options and map out your business plan.
What You’ll Need to Go Public
Companies that launch themselves into the public stock market without putting their ducks in a row first may soon find themselves drowning. There is a lot of responsibility that comes with the territory. Some things you’ll want to align first:
- Management and operation strategies that are strong and streamlined. Cannabis entrepreneurs aren’t selling joints out of your uncle’s basement anymore. They’re sophisticated machines, and they need the right people in place to make sure they run well and are poised for growth.
- Accountability and messaging. When you go public, the business no longer belongs to you, and all operations will need to be above-board and transparent.
- Corporate structuring. You need a board of directors with various committees for auditing, etc. If you’re a smaller firm, the whole process can take you away from day-to-day operations, and you need to be sure you’re willing to do that.
- Find a solid cannabis business lawyer with savvy on anti-cannabis taxing laws – or who partners with accountants that do. Tax obligations get trickier when you go public, and it’s all going to be more closely scrutinized.