On April 9, Boulder Colorado based company MassRoots, a social media site where cannabis enthusiasts can meet, share photos, lobby, and "cannamingle," began trading under the ticker MSRT. The company is set to be the first public cannabis company with a revenue model and customer acquisition strategy built entirely on social media platforms. The idea is to give cannabis users and enthusiasts a semi anonymous place to be social about pot without fear of broadcasting their proclivities to a broader if potentially less accepting audience on a media site like Facebook.
According to founder and CEO Isaac Dietrich, "MassRoots is one of the first cannabis-related companies to go public through an S-1 Registration Statement with the Securities and Exchange Commission, fully disclosing our audited financials, corporate history, and business plan. We're doing things differently than most of the publicly-traded cannabis companies currently on the market and don't want to be lumped in with other 'pot stocks.'"
Massroots is barely two years old. In that period of time, the app has garnered over 275,000 users. This is even more impressive because the app was banned by the App store late last year. After the ban was lifted, the app added 50,000 users in less than three months. The company also had to create a special filter that only allowed downloads by users in the 23 states where marijuana is legal.
The development was quickly labelled the first "weed tech" IPO. While this is a label some in the industry are calling a bit overblown, there are clearly innovative and new developments that have occurred during the company's path to going public. One of the more interesting things about this process is the SEC approval of the registration. Normally, the SEC requires a comment period after registration occurs. In this case, however, the SEC was the final arbiter of the comment period. This appears to be a new policy that the SEC will now implement for all marijuana companies who go public, although it is actually based on an older, 30 year old previously discontinued procedure.
MassRoots shares will trade on the OTC marketplace in the "pink sheets." Pink sheet stocks tend to be lower priced (under $1 per share) and highly volatile.
The company was valued at $5 million last year when it managed to raise $475,000. MassRoots requires another $2.5 million to cover operating expenses through the end of this year (2015) and has also stated that it will probably need to dilute current shareholders to attain this.
Revenue projections do not start until 2016. The company has posted a loss of nearly $920,000 as of December 2014. The revenue generating aspect of the site, MassRoots For Business, is planned as an online marketplace where merchants can advertise their goods and services to app users. The MassRoots community is highly engaged. Over 75 million interactions have occurred on the platform so far.
For now, however, MSRT's stock will be valued on the growth of its user growth. That said, as a cannabis investment where no actual cannabis is involved, the company presents an interesting play for investors who want to enter the space with a "no plant" strategy.
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