Financial Market – Michigan marijuana stock market could offer residents chance ‘to buy their hood back’
MLive is hosting a series of Michigan-focused, online Cannabis Industry Insights events in 2021. The first of three is scheduled from 12:30 p.m. to 2 p.m. on March 11, featuring Marijuana Regulatory Agency Director Andrew Brisbo and discussion about raising capital and securing assets to join the growing industry. More information and tickets are available here.MUSKEGON HEIGHTS — Michigan, like other states, has struggled to get middle-income minorities or those criminally punished for breaking drug laws that no longer exist to participate in its exclusive and lucrative licensed marijuana market.The state is required by law to help extend industry access to those groups, but progress has been elusive.The concept of a new intrastate stock exchange known as the Michigan Marijuana Market, some hope, could help change that. It would operate somewhat similar to well-known stock markets like the New York Stock Exchange and NASDAQ, but would be limited to small-scale investors and companies from Michigan.C. Cimone Casson, a Muskegon Heights woman who owns Cannas Capital, a marijuana and craft beer specialty insurance agency, helped create idea. She believes it will promote generational wealth in Black and impoverished communities while giving residents a chance to simultaneously invest in their neighbors’ financial success and “buy back into their hood.”In the 15 months since recreational marijuana sales became legal, large-scale investors have been swooping in and snatching up marijuana business real estate, licenses and market share, sometimes leaving local residents behind.Michigan voters in 2018 passed a ballot initiative that allowed for personal use and possession, as well as the creation of a taxable, licensed commercial marijuana market. Included in those instructions to state governors was the requirement for “a plan to promote and encourage participation in the marijuana industry by people from communities that have been disproportionately impacted by marijuana prohibition and enforcement and to positively impact those communities.”Efforts to promote those “social equity” goals have so far fallen short, according to state officials and many in the industry.The state licensing office has reduced licensing and application fees, offered free training or business planning and encouraged existing businesses to hire employees from communities where a disproportionately high percentage of the population has faced arrest, fines, jail or imprisonment for marijuana sales or possession in the past.Despite these and other efforts, due in part to the enormous cost of entry into the market — which can cost millions before a license is even issued — new businesses have largely been limited those who are independently wealthy and a growing number of large companies, sometimes with difficult-to-identify backers.These and other issues prompted Marijuana Regulatory Agency Director Andrew Brisbo to enlist a group of nearly 25 mostly Black entrepreneurs, politicians and community stakeholders to create recommendations that might change things. He called it the Racial Equity Advisory Workgoup, and its final recommendations were issued in January.Arising from that effort are proposals for mentoring programs, new license categories for smaller businesses, new taxes to fund social equity startups, corporate partnering plans, educational programs and the stock exchange.Casson, who said she grew a $980 marijuana investment in 2015 to nearly $20,000, wants to prop up minority-owned marijuana businesses without the traditional help of outside, deep-pocketed venture capitalists and instead with the investment of neighbors.Further, Casson said, fragmenting the investment with numerous shareholders makes a future hostile takeover more difficult.She said wealthy white entrepreneurs and large companies often move into largely Black communities, like Detroit or Muskegon Heights, Pontiac or Flint, buy up land or buildings, start successful businesses and whisk the revenue away to suburbs or other states.“There are African-Americans and brown people who are doctors, lawyers and nurses, and have $200,000″ to launch a business themselves, said Casson, who is Black. “How cool would it be for a nurse practitioner to take all her money and all she needs is that little, bitty push by her community and her friends to get to the other side and have a viable business?“Now that same woman is able to create jobs and generational wealth. Now the people in the neighborhood, not only do they salute her, they get a chance to be part of the program she created. And do you know how much that makes individuals do right when they know Mr. Johnson has invested in them?”How it worksThe Marijuana Regulatory Agency would receive and review applications from companies seeking to be listed on the stock exchange and host the exchange on a publicly accessible website, according to the recommendation.Companies wishing to be listed must be owned by someone who qualifies as “social equity” participant. Qualifications for current social equity benefits include anyone who has lived in one of 184 designated social equity municipalities for five of the last 10 years, has a prior marijuana-related conviction, or registered as a caregiver under the state’s medical marijuana law for at least two years between 2008 and 2017.Casson said this won’t be for unproven companies.“We have put in buffers and provisions for all parties as much as possible to mitigate risk,” she said.Michigan’s combined medical and recreational commercial markets are on pace to generate nearly $1.2 billion over the next year, based on the latest monthly statistical reports released by the state.Companies are required to show proof that they have obtained state and local licensing, cleared their projected business location for zoning and other development concerns and prove they’re in compliance with product testing requirements.“You can have your state license, municipality license, your real estate, but maybe you need money to obtain equipment and a host of other things,” Casson said.Companies that submit to a full financial audit will be allowed to sell up to $2 million in shares. Others that provide less extensive financial records are capped at $1 million.Once listed, underwriters will evaluate the market and company financials to determine a share price that will then be offered to the general public, who may purchase up to $10,000 worth if they can prove at least a $100,000 annual income, or they can invest up to 5% of their annual income if less than $100,000.Stock buyers must acknowledge in writing that they understand “they may lose all of the money they invested,” the sale has not been approved the state, there’s “no easy way to sell or transfer the security” and they may have to pay taxes, according to an outline of the market proposal released by the Marijuana Regulatory Agency.“They have to keep the stock for six months; that’s mandatory by statute,” Casson said.The market would follow laws established by the Michigan Uniform Securities Act, which allows for intrastate markets, and be supervised by the Corporations, Securities and Commercial Licensing Office, which like the Marijuana Regulatory Agency is another arm of the state Department of Licensing and Regulatory Affairs.“After six months, (shareholders) can put it in the secondary market, but they can only sell it to Michigan residents,” Casson said. “After they go for 12 months, they are able to receive whatever their shares are worth at that time (from the marijuana business) or they can continue to be shareholders.”Any transactions are to be coordinated by a “state exempt broker-dealer” and management of the stock exchange website would be handled by a crowdfunding company that specializes in managing online collection of startup capital.Casson said the market could be live as soon as May.“I know it’s going to happen,” she said. “People are looking for ways to be able to invest. As of right now, we have the right song at the right place.“There are some things that are going to be tricky, but that’s why you have someone like me, why we have entities like the (Marijuana Regulatory Agency). It’s our job to create the infrastructure, the policies and the program for people to be able to participate in.”With its bright financial outlook and upward trajectory, the Michigan marijuana market is a place where many businesses, employees and investors — big and small — want to be right now, but Peter Rageas, a Detroit-based attorney specializing in securities litigation, said like any investment, it’s about due diligence.“Due diligence means that they know the product they are investing is an investment that is illiquid — you can’t buy it today and sell it tomorrow,” he said. “So if somebody needs the cash or may need the cash later on, it may not be a good investment because it’s going to be tied up … and the profit will really be unknown.”With an unproven company, Rageas said investors have to recognize they’re taking a risk, since “there’s going to probably be no security for the investment” and no guarantee of any return at all.“There may not be any knowledge of specifically where this money is going to be deployed,” said Rageas, who often represents clients who were sold risky investments by brokers or advisers earning commissions. “And there’s the question of how do you value the investment when you get in and how do you value that investment when you get out.“What if you want to sell a year or two from now? Who determines the value and what do you do if you disagree with the value?”MLive posed this and other questions to the Marijuana Regulatory Agency regarding finer details of the stock market plan and was awaiting response.The full Racial Equity Advisory Workgroup report is available here.More on MLive:New taxes, stock market proposed to boost minority investmentMichigan to increase access to marijuana marketMichigan businesses licensed tow grow over 500,000 plantsMarijuana thrives in market changed by the coronavirusSpouses of licensees may be able to work for governmentA prior marijuana conviction could be a good thing
Financial Market – Michigan marijuana stock market could offer residents chance ‘to buy their hood back’
