Marijuana Law, Policy & Reform

Editor: Douglas A. Berman
Moritz College of Law

Tuesday, November 22, 2016

"NYSE Becomes First Major Exchange To List Cannabis Company With Acceptance Of REIT IPO" reports on the milestone of sorts at the New York Stock Exchange:

The race to be the first cannabis company to list on one of the major stock exchanges is over.


The New York Stock Exchange has approved the initial public offering of Innovative Industrial Properties, a real estate investment trust that plans to invest in medical marijuana properties. Since marijuana is still federally illegal, the New York Stock Exchange could be breaking its own requirement not to list companies that aren’t in compliance with the law.


This is why most marijuana companies are publicly traded at the Over-The-Counter market, where there is little concern over a company’s business as long as it files the proper paperwork. That’s not the case at the Nasdaq or the New York Stock Exchange, both of which conduct strenuous reviews of potential clients. Neither would comment on this story.


Year-to-date, IPOs are down 42% from last year. This decline in business has affected both exchanges. Could the exchanges be willing to ease their rules in order to bring in new business?


Innovative Industrial Properties filed to go public on Oct. 17 and chose the New York Stock Exchange as its home. At the time of the filing, the NYSE would only share its filing review process and would not comment on the filing request. The review process states that “companies must be in compliance with the law.” On Nov. 17, the REIT confirmed it had been approved, although the NYSE still won’t discuss the listing.


NYSE may have found comfort in the company’s top management. Executive Chairman Alan Gold co-founded two NYSE-listed REITs, BioMed Realty and Alexandria Real Estate. An affiliate of The Blackstone Group purchased BioMed for $8 billion earlier this year and Alexandria is currently listed at the NYSE under the symbol ARE. So, they have worked with Gold before and maybe that is why they were willing to take the risk.


Cannabis social media company MassRoots also doesn’t “touch the plant,” but they were rejected for an uplisting by Nasdaq. Chief Executive Officer Issac Dietrich said, “We went to Maryland to meet with the Nasdaq listing people and their main focus was on the risk factors.” Dietrich said the company was very transparent that some business people could accuse them of aiding and abetting criminal activity.


“They were a little uncomfortable with that risk factor. They spent six weeks reviewing the application and then told us they were not willing to move forward,” said Dietrich. “They didn’t want to be a trailblazer.” He is hoping that since the NYSE has accepted IIPR, it will give them more comfort...

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