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"Facebook of cannabis" seeks NASDAQ listing

Last updated: 09:48 15 Apr 2016 EDT, First published: 04:48 15 Apr 2016 EDT

"Facebook of cannabis" seeks NASDAQ listing
Cannabis remains banned under federal law despite 24 states legalising medical use

Earlier this week, the self-styled Facebook of cannabis filed the necessary paperwork with US regulators to list on NASDAQ.

It is looking to raise up to US$6.5mln through the listing.

Launched in 2013, MassRoots is an online social platform for its 775,000 users to share their cannabis experiences, follow dispensaries and keep up to date on legalisation.

It only began selling advertising in August last year.  Advertising revenue can be difficult to forecast, but as Facebook has shown, it can be a successful strategy if executed properly.

Businesses can advertise directly to cannabis users, bringing in revenues of around US$214,000 last year. It had US$386,000 in cash at the end of period, but saw a net loss of around US$8mln.

“We believe that by creating a central community of cannabis consumers, we are creating a valuable marketing channel for cannabis and its ancillary products,” said the group.

It’s not the first time MassRoots has attempted to list on the exchange.

In November it failed to meet all of the listing requirements.

It needed to raise US$5mln to meet shareholder’s equity, but only managed around US$1mln.

This time however, the privately held New York investment bank Chardan Capital Markets has reportedly committed US$6.5mln.

It will also need additional money to meet NASDAQ requirements, which is expected to cost the company around US$150,000 annually.

A successful application would be a radical advancement for the industry, blazing a trail for other cannabis groups to come out of the shadows and list.

UK firm GW Pharmaceuticals, which develops cannabinoid prescription medicines, has been listed on the exchange since 2013.

But, unlike MassRoots, GW is exclusively focused on the medical marijuana industry.

Cannabis remains banned under federal law despite 24 states legalising medical use and a growing number looking to permit recreational use.

But MassRoots does not deal with the plant directly. Instead it makes money from selling advertising to those who do.

“We may be deemed to be aiding and abetting illegal activities,” said the group.

Law enforcement could well force the company to shut down, meaning investors would lose their money.

NASDAQ has six weeks to decide whether to admit the company, but it is unclear whether it would agree to such a listing due to the hazy legal status.

MassRoots currently trades on the over the counter market with a $61mln market capitalisation.

It went public last April and shares have been rather volatile, ranging from 65c to highs of $7 over the last year.

There is a limited pool of around 90 shareholders as of March, with about 47 million shares issued and outstanding shares between them.

Cannabis-focused agriculture group Terra Tech also took steps to seek a NASDAQ listing this week.

Companies are required to meet various corporate and financial targets in order to list, which Terra Tech seems to be hitting.

Due to the required quiet period following the application, MassRoots chief executive Isaac Dietrich was unable to speak to Proactive.

The US’s best-known private investor in the industry, Brendan Kennedy - whose portfolio includes the official Bob Marley cannabis brand – was sceptical anyone would be able to sell into a liquid market anytime soon.

“In order to maximise the return to our shareholders, it would be inconceivable for us to go public until prohibition ends in the United States,” he told the press.

 

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