NASDAQ Sending Mixed Signals On Cannabis.

NASDAQ Sending Mixed Signals On Cannabis.

On May 23, MassRoots received word that its application to list on the NASDAQ had been denied. It is understood that MassRoots’ application was “denied by the exchange on the grounds that MassRoots may be deemed to be aiding and abetting the distribution of an illegal substance“.

For those of you not familiar with MassRoots, the company is “one of the largest and most active social networks for the cannabis community with 6255,000 users.” As the FaceBook of cannabis, MassRoots does not ‘touch’ actual cannabis.

While there are a number of cannabis related biotech issuers listed on the NASDAQ, the exchange seemed to make it clear that; “as long as marijuana is federally illegal, neither NASDAQ or the New York Stock Exchange is going to list a company related to recreational marijuana.” Or it was clear, until Microsoft, one of the largest companies listed on the NASDAQ, announced Thursday that they were entering the cannabis business!

Microsoft is teaming up with Kind Financial to “acquire government-facing contracts for seed to sale tracking“.  Seed to sale technology is designed to track cannabis from cultivation (seed) to final purchase by the end user (sale).

seed to sale
BioTrackTHC “The Seed-To-Sale Tracking System”
This news obviously doesn’t make Microsoft a “marijuana company” but it certainly puts it into the cannabis business. For an exchange concerned about “aiding and abetting the distribution of an illegal substance”, I would say having one of its largest issuers tracking the cultivation, harvest, production, and sale of cannabis may be considered aiding and abetting. 

As of now, MassRoots is appealing the NASDAQ’s decision and has requested a written explanation of the denial.The National Cannabis Industry Association and ArcView Group also submitted a pretty interesting  “Statement of Support of MassRoots’ Appeal” to NASDAQ.  

In the written appeal, NCIA and ArcView point out that the standard of aiding and abetting the distribution of an illegal substance is very vague. They go on to ask;

Is every power company that provides electricity to marijuana cultivation operations aiding and abetting? What about Google that shows people where to buy marijuana? Is Facebook liable for the tens of thousands of illegal drug transactions that likely occur over its network on a regular basis? The Denver Post and New York Times have publicly accepted advertising dollars from the cannabis industry – are the owners of those publications also banned from listing on Nasdaq? Several local and national banks traded on national exchanges have accepted regulated cannabis businesses as clients and conduct marijuana-related transactions on their behalf, could those banks also be perceived as aiding and abetting?

We probably won’t have a clear understanding of why MassRoots’ application was denied until we see the written response from the NASDAQ. It is also possible that MassRoots was denied for not meeting the NASDAQ listing requirements. In the meantime, cannabis companies looking to list their securities are welcome on the OTC Markets and Canadian Exchanges. I wonder if the NCIA will amend their letter to add tech giant Microsoft to its list of NASDAQ companies aiding and abetting the cannabis industry…

What do you think?

Will Microsoft’s new venture will help with MassRoots’ appeal? Is it unfair that NASDAQ is turning away tech startups in the cannabis space while allowing tech giants to remain listed and enter the industry?  Feel free to share and comment.

 


About Ben Kotch:

Ben Kotch is a managing director and investment committee member at Acquis Capital, LLC, a private investment firm that specializes in acquisitions. He has extensive experience with both private and public companies. Ben graduated with an economics degree from Bentley University where he concentrated in entrepreneurship and law.

For more, please follow on Twitter.


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