Cannabis paraphernalia supplier KushCo Holdings Inc., which supplies the containers, hardware, mouthpieces, bottles and cartridges used by companies in the marijuana business, is aiming to be on the big exchanges.
The Garden Grove-based company filed an application on July 9 to list the company’s common shares on the Nasdaq Global Select Market. It’s currently listed over-the-counter, where about 450,000 shares trade daily. At press time, it had a market cap of about $450 million, making it the most valuable OC-based company in the cannabis industry.
“We are clearly unique to be listed on the OTC with a company of our size,” KushCo Chief Executive Nick Kovacevich told the Business Journal.
The listing on Nasdaq’s most prestigious tier will raise the company’s profile by diversifying its shareholder base and enhancing liquidity, Kovacevich said.
Busy Season
Last month, the Business Journal revealed that KushCo received a $21.3 million investment from New York City-based Hudson Bay Capital Management LP, which has $7.8 billion in investments directly and through affiliated funds funding.
Also on July 9, KushCo released its fiscal third-quarter report that showed revenue increased 221% year-over-year to $41.5 million compared to the same period a year ago. The revenue increase was due to acquisitions and expansion into new states and countries where the industry is becoming legalized, such as Canada. Its net loss widened from $9.2 million a year ago to $10.6 million.
Its shares jumped 5.7% following the report.
“Everyone was looking to see the margin improve our earnings and we did,” Kovacevich said.
The company is expected to almost triple revenue to $148 million in fiscal 2019 and then jump another 64% to $243 million in fiscal 2020, according to the consensus of eight analysts that cover the stock.
The Nasdaq application touches on a legally complicated area that has investment firms questioning how much business they can do in the cannabis industry. While some states have legalized marijuana, the federal government hasn’t and federally chartered banks are prohibited from doing business with such companies.
“Exchanges [and] banks [are] in the process of trying to figure out how to handle cannabis,” Kovacevich said.
KushCo has argued that since it does not handle cannabis directly, it should be able to do business with any company.
“There are some companies who touch the plant and they are in violation of federal law,” but KushCo is not, Kovacevich said.
Congressional Hearings
Some Nasdaq companies are already generating revenue from the cannabis industry. The Scotts Miracle-Gro Co. (NYSE: SMG) last year paid $450 million to buy Sunlight Supply, a hydroponics supplier, to gain access to the products.
The day after KushCo’s filing, a congressional hearing for the decriminalization and legalization of cannabis was held; “Everything in politics seems impossible until it happens,” Rep. Ted Lieu (CA-D) said.
Separately, KushCo launched its biodegradable packaging through Oakland-based SunGrown. The company also signed a deal with Pasadena-based IEKO to produce biodegradable and compostable plastics portfolio.
