Earlier this year, Governor Jared Polis signed Colorado House Bill 19-1090 (the “PubCo Bill”), officially repealing the provisions of Colorado law that prohibited publicly traded companies from holding a license to participate in the state’s marijuana industry.
The PubCo Bill sets certain requirements for public companies wishing to apply for a Colorado marijuana license, including that the public company must:
- Be organized under the laws of a state or jurisdiction that has authorized the sale of marijuana;
- Have its principal place of business in a state or jurisdiction that has authorized the sale of marijuana;
- Have a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended and be listed on a national exchange, and be quoted on the OTCQX or OTCQ tier of the OTC Markets (subject to certain other restrictions), or be a Foreign Private Issuer (as defined in Rule 405 of the Securities Act of 1933, as amended) and be listed on the Canadian Securities Exchange, Toronto Stock Exchange or TSX Venture Exchange; and
- Not be an “ineligible issuer” (as also defined in Rule 405 of the Securities Act of 1933, as amended), such as a blank check company, penny stock issuer or shell company.
The PubCo Bill allows public companies to apply for (or wholly acquire) a marijuana license in Colorado on or after November 1, 2019.
Ostensibly the first of many such financings, LivWell Holdings, Inc. (one of the largest employers in Denver) filed a Form D with the United States Securities and Exchange Commission reporting a $54 million convertible note offering.
It will be interesting to see if the PubCo Bill not only increases investment dollars in Colorado cannabis operations, but also creates a wave of business consolidations in the state, as larger out-of-state and international public cannabis companies seek to expand their presence in one of the cannabis industry’s most important geographic markets.
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