I stumbled upon this recent post by Jason Paltrowitz titled “Lawful but Awful: The Small Cap IPO Cycle.” It contains some interesting findings and I like everything about it for cannabis companies, except the conclusion. The conclusion is that OTCQX and OTCQB markets are a good bet for small companies, because these markets “offer a simplified path with financial, corporate governance, and disclosure requirements tailored to smaller companies.”
Plant-touching U.S. cannabis companies cannot list on the senior U.S. exchanges, meaning the NYSE or Nasdaq. Still, many U.S. cannabis companies that want to raise significant capital choose to “go public.” The well-worn path is either to: 1) list in Canada or overseas, via reverse merger, or 2) head to the abovementioned OTC markets, again via reverse merger, and pursue a Regulation A offering. However, in my experience, the OTCQX and OTCQB are not good places for cannabis companies.
OTC markets are teed up for fraud
Don’t take my word for it: here’s an SEC bulletin updated earlier this year and another in the specific context of cannabis stocks– going back to 2014. Here too is a FINRA warning, a sample DOJ microcap cannabis prosecution, and an FBI case study. As you