August 2018

F rom initial public offerings to reverse takeovers, a growing number of cannabis com- panies are turning to public markets in the United States and Canada as they hustle to raise the capital needed to stay ahead in the green rush. “These companies are really starting to see the public markets as a viable option for them to raise capital, and clearly over the past two and three years, we’ve seen the pace and number of firms going public really acceler- ate,” said Jason Paltrowitz, executive vice president of corporate services at OTC Markets Group, which manages trading platforms for more than 10,000 over-the-counter securities. “Every year it has grown exponen- tially on itself, and this year will be no exception,” Paltrowitz added. While making the leap to pub- lic markets offers a host of upsides, including quicker access to capital, the move is a complicated maneuver that carries risks for companies that fail to prepare, said Matt Karnes, founder of New York-based GreenWave Advisors. “There are major costs and com- pliance issues to consider that could become burdensome if you’re not prepared,” said Karnes, a CPA who provides financial analysis, auditing and accounting services to cannabis firms in the United States. As more companies consider taking the public plunge, Marijuana Business Magazine asked industry experts to offer their insights, lessons learned and By Lisa Bernard-Kuhn Five tips marijuana executives should consider before their business becomes a publicly traded company EXECUTIVE SUMMARY As cannabis firms hustle to raise capital, more are turning to public markets in the United States and Canada. Going public offers numerous upsides, but industry experts warn the move is a complicated maneuver that carries big risks for companies that fail to prepare. Here are their tips for taking the public plunge: • Get your financial house in order and tap a savvy team of advisers, bankers, attorneys and accountants to assist your firm. • Know your options. Lean on advisers who can explain the upsides and downsides of public markets in Canada and the United States – and whether your firm is best suited for a reverse takeover or an initial public offering. • Going public isn’t cheap. It’s easily a seven-figure endeavor, so be prepared. • Have a post-public plan that includes a team who can respond quickly to investors. top tips for making the move. Here’s a roundup of what they had to share: 1. Firm up Your Financial Management “You have to get your financial house in order” once your business is commit- ted to making the jump, Paltrowitz said. “For some cannabis companies, that’s a little tough, because that means culling through all that cash that’s in a vault in the back room.” Even more seasoned, multibillion- dollar companies face a hefty checklist August 2018 • Marijuana Business Magazine • 49