Week in Review: Ruling on Delivery App, Boost for MMJ Stocks + MA Businesses Gearing Up

Did you miss the webinar “Women Leaders in Cannabis: Shattering the Grass Ceiling?” Head to MJBiz YouTube to watch it now!

By John Schroyer and Tony C. Dreibus

A smartphone app that facilitates medical marijuana deliveries is ordered to cease operations in Los Angeles, two publicly traded companies help build credibility for cannabis stocks, and Massachusetts MMJ businesses move forward in the face of regulatory uncertainty.

Here’s a closer look at some notable developments in the marijuana industry this week:

Future of Delivery in Doubt

A Los Angeles judge issued an ominous ruling on Tuesday that could bring MMJ delivery services in the city – and possibly other areas of the state – to its knees.

Nestdrop, a smartphone app that facilitates home delivery between MMJ patients and dispensaries, was ordered to stop its service in Los Angeles.

The judge found that Nestdrop is in violation of a city ordinance that prohibits such deliveries, even though the company doesn’t actually handle cannabis itself.

Los Angeles attorney Aaron Lachant predicted the outcome in early December, after LA City Attorney Mike Feuer filed a formal complaint against Nestdrop. Lachant pointed out that Proposition D, a voter-approved measure from 2013 that governs dispensaries in LA, specifically forbids the kind of deliveries that Nestdrop specializes in.

“Proposition D expressly prohibits medical marijuana delivery services from operating unless a primary caregiver is delivering marijuana to their qualified patient,” Lachant previously wrote in an email to Marijuana Business Daily.

Lachant added at the time that such a ruling against Nestdrop wouldn’t necessarily set a legal precedent in other markets that have similar MMJ delivery operations, as the case involves a local ordinance. Still, he said it could embolden MMJ opponents in other regions to push for similar bans.

Nestdrop executives said they will continue to operate outside LA’s boundaries, but they could come under pressure in other areas as well.

Credibility for Cannabis Stocks

Publicly traded cannabis companies got some good news this week.

The Securities and Exchange Commission granted Terra Tech Corp., traded on the over-the-counter markets, approval to sink $6.8 million in investment money it raised this year into medical marijuana operations in Nevada.

Also this week, GW Pharmaceuticals, a U.K.-based company that produces cannabis-based medical treatments high in CBDs, was added to the Nasdaq Biotechnology Index (NBI), which tracks the performance of a set of securities classified as biotech or pharmaceutical companies.

Both moves are indications that publicly traded marijuana companies are gaining legitimacy, said Alan Brochstein, a Chartered Financial Analyst who runs a cannabis-focused stock website for investors.

Being listed on the NBI will put GW Pharmaceuticals in front of more investors.

”It could help, in the long run, create a little more demand…and help with (investor) awareness,” Brochstein said.

And Terra Tech’s approval indicates that the SEC might be OK with companies that actually handle marijuana, provided they have a license to do so.

Publicly traded companies have had some troubles gaining acceptance among institutional investors, as some are considered either fly-by-night operations or lack a valid business structure. This week’s developments, at the very least, may help investors gain confidence in the marijuana market, Brochstein said.

“What a nice way to end a very challenging year for the publicly traded stocks – a couple of nuggets of good news,” Brochstein said.

Moving Forward Amid Uncertainty

When the future looks uncertain, sometimes the only thing to do is to keep moving forward.

That’s the approach fledgling medical marijuana companies in Massachusetts are taking as an anti-marijuana governor gets set to take office.

Several companies are working closely with individual cities to open grows and dispensaries in suburbs near Boston. Nearly a dozen other businesses poised to receive licenses are having similar discussions with municipal officials.

But there’s plenty of uncertainty on the horizon.

Gov.-elect Charlie Baker said recently that he has reservations about the state’s MMJ regulations and suggested the rules may be “problematic.” On top of that, Baker said he will “vigorously” oppose recreational legalization if it becomes a political topic in the next couple of years.

Baker’s opposition to the current MMJ structure and legalization in general is just another obstacle for Massachusetts cannabis companies that have faced numerous delays and hurdles since medical marijuana was approved by voters in 2012.

No dispensaries have opened in the state, and the licensing process for cannabis businesses has been fraught with controversy and setbacks.

Marijuana businesses and Baker now appear to be on a collision course, and it’s unclear what’s in store for the industry.

John Schroyer can be reached at johns@mjbizmedia.com; Tony C. Dreibus can be reached at tonyd@mjbizmedia.com