Alongside the plethora of small-scale medical marijuana dispensaries dotting the San Diego business landscape, some bigger, public players have entered the market as well, and say they’re only prepared to grow -- so long as the government lets them.
“A big struggle now is we are on OTC -- good luck calling the New York Stock Exchange and being listed as a cannabis company,” said Andrew Hard, director of public relations for HempMeds and its San Diego-based parent company, Medical Marijuana Inc., (OTCMKTS: MJNA) the world’s largest distributor of CBD-rich hemp-oil -- distinctively not marijuana -- with a growing portfolio of related companies.
“And you’ve got to keep in mind that this is while cable news shows blast like crazy ‘Invest in cannabis!’ But there is still a stigma out there -- for a cannabis business to be listed on the New York Stock Exchange is like climbing Mt. Everest now,” Hard said.
Unless, Hard says, you’re a pharmaceutical company such as GW Pharmaceuticals, which works with cannabis and cannabidiol products and is listed on Nasdaq and the London Stock Exchange.
“Is that the only way or route American people want companies to be listed on the New York Stock Exchange?” Hard asked. “Probably not, but part of the story then becomes: Be a pharmaceutical company, deal in synthetics, which is what GW Pharmaceuticals is doing, and there you go -- publicly traded stock over $100.”
Medical Marijuana Inc., which began trading in March 2009, is a particularly interesting case given that despite its name, it doesn’t actually sell marijuana. Its products and those of its eight portfolio companies -- including HempMeds, dispensary security business MPSI in Murrieta and Kannaway, which offers a high-end line of CBD beauty products -- deal only with cannabidiol-rich hemp oil, which is illegal to grow in the United States but legal to import and sell in all 50 states and 40 countries.
CBD-rich hemp oil can be taken orally or vaped, but is not smoked, and contains less than 1 percent THC, the component of marijuana that creates the high, or psycho-altered state, that has it on the controlled substance list.
Hard said this differentiation between the products Medical Marijuana Inc. sells and invests in and marijuana itself has been helpful in a number of ways, though the company still faces challenges in addition to the stigma and federal law keeping these cannabis companies out of larger stock markets.
For instance, the banking problem plaguing medical marijuana dispensaries in the 23 states and District of Columbia in which they’re legal and legal recreational-use stores in Colorado and Washington is alleviated in part since CBD oil is legal under federal law.
Even in states where they are legal, medical marijuana shops can’t deposit checks or pay employees via direct deposit at federally insured banks and are therefore forced to deal almost exclusively in cash -- a big target on any company, and a reason Medical Marijuana invested in MPSI in the first quarter of 2014 -- Medical Marijuana Inc. has a bit more flexibility.
A specific concern to the hemp oil business is the Food and Drug Administration’s decision to classify CBD-rich hemp oil as a food or nutritional supplement, and subject it to the corresponding regulations. Though “medical” is in the company’s name and in that of its subsidiary HempMeds, Hard said that because of this FDA classification, no salesperson can make any sort of medical claims regarding the product at all -- a bit of a hard sell when that is, ostensibly, its whole purpose.
“No representative of our company will say ‘This does that, or has this benefit,’” Hard said. “The FDA does not recognize CBD even though there’s research on it, and it effects our day-to-day operations and what sales reps tell customers on the phone -- they won’t answer questions about the product for that reason. It’s the stance of the federal government and we follow that and are compliant because we are an upstanding San Diego company and care about being reflected well in all eyes.”
To that end, Hard said, the company now occupies four buildings in the San Diego area and employs 52 people. He said that might expand since Medical Marijuana Inc. is in the final stage of closing a $6.8 million deal with Dixie Holdings to acquire the well-known brand’s hemp business, Dixie Botanicals, and relocate those facilities to San Diego starting Aug. 1.
Medical Marijuana Inc.’s total portfolio is valued at $194 million.
Medical Marijuana Inc. isn’t the only publicly traded company dabbling in the marijuana market with local ties.
Strategic Global Investments, (OTCMKT: STVB) parent company of WaZillo and WaZilloMedia, which provide live streaming video content and digital advertising, is in production on a reality television show “featuring real-time operations and associated drama within the newly legalized marijuana industry,” according to a company news release from March 4.
On March 25, the company reported that it retained JGMJ Consulting to provide expertise on entering the rapidly growing marijuana industry.
“JGMJ has already been in discussions with several other merger and acquisition candidates and marijuana industry prospects regarding Strategic Global,” a news release states. “JGMJ is confident that because of Strategic Global’s current strong cash position, that one or several mergers will be successful. It’s anticipated that Strategic Global will be in position to close on several of the impending marijuana-related transactions within the next 60-90 days.”
Andrew Fellner, CEO of Strategic Global Investment, declined to comment on the capacity and location in which the company might enter this space.
“We currently have filings with the SEC and my attorney suggests that we remain in a quiet period until those filings are approved,” he said in an email.
Rostock Ventures (OTCMKTS: ROSV) has also released information regarding its development of the iWeedz platform, a map of local marijuana dispensaries and related information, and in a Feb. 4 news release wrote that the company would be pivoting to a marijuana focus.
"As stated in a previous release, we have made a pivot with our business model and are now focusing on marijuana commerce,” a news release states. “We are taking an agnostic investing approach to this industry. Simply put, we are exploring ways and means of streamlining this industry for both consumers and vendors by providing cutting edge, scalable solutions that remain easy to use.”
The company and its president, Gregory Rotelli, have been unreachable, and the phone number listed on its website connects to a different company. Rotelli’s number, according to Bloomberg, is out of service and two emails went unanswered.