Though 21 American states have legalized the sale of medical marijuana, and Colorado and Washington have gone so far as to accept recreational weed use, MMJ-based businesses across the US are facing a critical issue that has bottlenecked their industry; how do you bank your money when the banks refuse to take it from you?
Medical marijuana dispensaries, suppliers and associated industries and finding it nigh impossible to put their money in the bank due to the fact federal laws still classify marijuana as illegal. Faced with the likelihood that doing business with ‘criminals’ would cause federal regulatory problems, banks and credit unions are shutting the burgeoning industry out of the traditional financial market.
Banking giants such as Bank of America and JP Morgan & Co won’t even discuss the possibility of taking weed deposits for fear of manic DEA officials storming their offices and charging them as accessories to the drug trade, a fear that isn’t without foundation as the drug enforcement agency continues to raid state-approved medical marijuana grow operations and outlets, charging employees with felonies and confiscating equipment and product.
Frustrated owners and operators of marijuana-related businesses are literally stuck with truckloads of cash, making them prime targets for robbery. They also struggle to safely transport product without hiring expensive local private security firms, as nationally operating transport companies, like Brinks, refuse their services.
Colorado collected $6.1 million in taxes in just the first two months of this year, but understands there’s a lot more out there to collect since, how does a $200m market cap weedco pay its taxes when it’s forced to stockpile C-notes behind the counter?
Answer: It often won’t, so Denver has pushed through legislation creating a new banking co-op facility that would let weedcos work together to create their own banking style institution.
Which is just what we need – stoners running a bank. This, clearly, is all a bit ridiculous.
Enter Abattis Bioceuticals (
CSE:ATT,
Stock Forum).
Riding a steady stock rise since it became a weedco, the company is hoping to become medical marijuana’s banker with
their recent acquisition of a chunk of Instant Payment Systems, a Washington state-based firm that proposes to provide MMJ patients throughout the world with loadable payment cards and a mobile app that will remove cash from the equation and allow the transfer of funds digitally to bank accounts via their system.
The payment cards are intended to serve a dual purpose as they will also allow patients and regulatory agencies to track products and purchases made through the card for both safety and taxation purposes, without a staffer needing to make a run to their car at the end of their shift with a handbag stuffed with twentys.
This could be a big deal for the dot.bong world, but the acquisition of the payment company wasn’t entirely altruistic, as the system is also wired to take a piece of every transaction across the network.
Abattis’ move to purchase a 34% stake in the payment company also serves to place the final piece of the puzzle in its plan to provide seed-to-sale services that apply across the rapidly emerging MMJ sector.
Company president and CEO, Mike Withrow, at a Vancouver reception Thursday, commented on the milestone saying, “This transaction enables the company to provide a valuable service and solves a problem to an unmet need for dispensaries of medical marijuana and other botanical medicines.”
He added, “The IPS cards and phone apps can be branded and loyalty programs can be used so the patients save money and can maintain a budget while managing their purchases of Medical Marijuana. The system also protects dispensaries from carrying cash as funds are automatically credited to their accounts.”
Withrow said, “It is becoming clear that investors understand our comprehensive business model. We are not just about cultivation,” adding, “We look forward to integrating this technology into our Washington State Lab model. We believe the use of this system by dispensaries will become the minimum standard requirement for dispensaries worldwide.”
Making the jump from idea to reality will be the task for Abattis. It can be notoriously difficult to make people pick up an app en masse, even if it helps them buy their weed, but as one prong of a diverse industry strategy, it has a mighty potential upside.
Abattis shares were largely unchanged on the news. The company has a $55.7 million market cap with 47.6 million shares outstanding.
MARIJUANA SECTOR UPDATE: By Chris Parry
Thanks to Gaalen for going deeper on the Abattis deal. I suspect he volunteered for it because he thought he was going to get free samples. Sucker.
On to other news. Look, I’m not going to flat out suggest that my article yesterday on Papuan Precious Metals (
TSX:V.PAU,
Stock Forum) CEO Dev Ranhawa was solely responsible for that company jumping 30% in today’s trading, but.. no, scratch that. I’m totally going to say that.
If you missed the piece, in which Randhawa outlines how he managed to back his truck out of a long term Change of Business trade halt, how he feels the TSX doesn’t get the realities of business on the Venture end of town, and his plans to turn the US dispensary business into a branding roll-up,
you can find it here.
It’s one of the most widely read things we’ve published and, for mine, exactly the kind of information more companies should be working to get in front of investors.
That said, Papuan hasn’t hit its home run yet. Lots of work to do and lots of potential pitfalls – like state-legislated ownership rules, banking bottlenecks and that whole ‘it’s illegal at the federal level’ situation.
IN OTHER NEWS:
Affinor Resources (
CSE:C.AFI,
Stock Forum) put their big brains together and decided, rather than wait for a weed license, they might as well make use of their facilities to
grow strawberries. Their plan will allow them to make short term cash, test their facility in a real grow situation, test the benefits of their vertical growing technology, and demonstrate to regulators that they’re a f’real business.
Affinor will use their Vertical Designs (VDL) tech to maximise production space, and the software the system uses handles mechanical pollination with zero water waste.
CEO Sebastien Plouffe said of the plan, “We believe that this model will revolutionize the world in the area of food production by which 12 months per year production will be executed without any pesticide and with very high quality products. We already have targeted the location to build the first facility and we shall execute the plan as soon as possible.”
UPPERS:
Also up significantly today was Bayhorse Silver (
TSX:V.BHS,
Stock Forum), up 18.1%, though it was on tiny volume with no news.
Premier Brands (
OTO:BRND,
Stock Forum) also climbed 64% on massive volume, which isn’t saying much as you get about 500 shares of it to the dollar. Premier stock is like Zimbabwean currency – it might make you feel rich to have a stake with 18 digits, but when you sell, you’ll still need a pocketful of change to get on the subway.
Enertopia (
CSE:C.TOP,
Stock Forum) rose today by 5.6%, but considering how far it has fallen over the previous few months, and the tepid volume it is experiencing on this rise, it may be a while before it can generate the interest needed to get back to its $0.80+ days.
DOWNERS:
Greenbank Capital (
CSE:C.GBC,
Stock Forum) dropped 46.6% today on just a little over a thousand shares traded, indicating a very low demand for those shares, not to mention one trader’s intense desire to lose his stake, even at a loss of nearly half his cash.
I’m not going to say Greenbank is a good buy, based on what we’ve seen of their business model, and the fact that it’s now trading far lower than when it was a Bitcoin play, but if you’re a dead cat enthusiast, this cat is not ‘just resting its eyes.’
Senator Minerals (
TSX:V.SNR,
Stock Forum) dropped 23% today. Which is the first news they’ve been involved in for months. Might be time for them to make an
Irish goodbye.
IN BRIEF:
Almost every lawmaker in Florida
supports a medical marijuana bill.
Connecticut has allowed medical marijuana for two years now, but
local laws are keeping licensed dispensers from setting up shop, leaving card-holding patients to buy from street dealers.
Nothing else, man. Companies be scared to send out press releases lest they be Change of Business stomped, and the number of mining companies diving in to the weed space has moved to a trickle. We are officially shifting into the second phase of this new sector: It’s roll-up time.
THE MOVERS: