Carlsbad, CA / June12, 2014 / Permits or licenses for medical marijuana dispensaries have taken center stage in marijuana business media as state and local governments adopt strict application processes for marijuana dispensary permits or licenses. Some entrepreneurs who have been shut out of their respective lottery or selection process without a license or permit have considered legal action against governing agencies, which Fred Dreier of Marijuana Business Daily warns against in most cases.
The recent House vote in favor of eliminating DEA enforcement efforts toward state-compliant dispensaries provides potential framework for federal legislation. It would appear that state-compliant operations which meet or exceed regulatory initiatives are no longer at risk of prosecution by the federal government. State or local governments who restrict the number of dispensaries will change the supply chain in favor of efficiency and scale - permitted dispensaries will cater to an extremely large and ever increasing patient population.
Having a state-compliant operation (or, licensed operation with Health Canada) significantly bolsters potential for equity capital, as it removes an additional layer of perceived risk between investor and issuer.
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"The Real Contenders" in Canada
In Canada, there are reportedly more than 600 applications in process for a medical marijuana license under the new laws. As only a handful of actual licenses have been issued, issuer "Tweed Marijuana" (TSXV: TWD) is well positioned in a Canadian market believed to garner more than 400,000 patients. Their $15 million bought deal financing illustrates a level of comfort with investors and sets a precedent of capital formation for other industrial scale producers in Canada who receive a license from Health Canada. James West of Midas Letter reports that Tweed Marijuana has few peers as far as Canadian marijuana stocks are concerned.
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Recent US-Based License Recipient
In the US, GrowBLOX Sciences (OTCQB: GBLX) announced that it's wholly owned subsidiary GB Sciences Nevada, LLC obtained a medical marijuana license in Clark County, Nevada. Commissioners only awarded 18 licenses out of 79 final applicants - a three day hearing was conducted in order to make the selections after an unorthodox process which included 6-minute "pitches" to decision makers. Several "high-profile Nevadans" were among those receiving the limited number of licenses.
In addition to receiving a medical marijuana dispensary license in Nevada, GrowBLOX Sciences announced an LOI with First Security Bank of Nevada in a deal where GrowBLOX and First Security would implement a revolutionary cash management system via kiosk. The company hopes to demonstrtate compliance and transparency for their Clark County location and possibly the industry; the LOI appears to be the first public and transparent move between a dispensary and bank involving cash deposits from dispensary operations. A third-party paid for advertising of GrowBLOX Sciences (OTCQB: GBLX) on MarijuanaIndex.org and within certain written publications such as this.
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What Licenses or Permits & Compliance Mean to Capital Markets
More clarity from the federal government on compliance and enforcement means more investor money and bigger players entering the arena. Previously thought to represent tremendous economic and criminal risk, dispensaries which operate in jurisdictions with permits, licenses, or established protocols for compliance are increasingly attractive from an investor's lens.
Regulatory "comfort" in the industry among insiders and active investors is at an all-time high, as illustrated by the size of private equity dollars and sheer mass and overall liquidity of issuers or mergers within the public sector. Some would argue that an overall decline (and general roller coaster) within cannabis public equity prices is extremely bearish, but an exponential increase in companies vying for investor attention means lower liquidity on a per-issuer basis. Investors are likely to become more discerning, especially in light of regulatory actions in 2014. When ambiguity is removed regarding federal treatment of state and locally compliant marijuana dispensaries - look for potential IPOs on national exchanges in the US and acquisition activity to gain in both quantity and size.
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