An article in the Marijuana Business Daily presents a rather interesting idea cannabis industry businesses in CA. In this case, an Oakland, CA-based dispensary called Black Oak Gallery is being acquired by/merging into a publicly traded Newport Beach, CA grower, Terra Tech (TRTC). Although the MBD article titles states "Oakland Dispensary Shares To Be Publicly Traded", we believe the key learnings are:
- Cannabis industry companies are being granted access to stock exchanges by the SEC (not as obvious or easy as it would seem).
- Such mergers/acquisitions/joint ventures are a way to enter the CA market.
- Such mergers/acquisitions/joint ventures will likely happen more frequently as MMRSA rules get applied and vertical integration gets more difficult (our expected timing: end of 2016).
- Such mergers/acquisitions/joint ventures may be a way to alleviate the taxation challenges from Section 280E of the tax code and the difficulties for cannabis industry companies to secure bank accounts (as well as the restrictions on MMJ CA dispensaries and collectives to operate as non-for-profit entities).
- Such mergers/acquisitions/joint ventures can also help operationally different businesses manage cash flow and other financial planning issues more efficiently (Blum is reported to have generated close to $15m in revenue in 2015).