Discover more from Money Puff
This newsletter is ashamed to send you ad-free content
The advertising issue
Word of the week: advertising
One of the most important things that a business geared toward consumers has to do is advertise.1 People are not going to buy your product, or visit your store, or consume your content if you don’t tell them that it exists and give them some ‘hook’ to give it a try. See: billboards, commercials, banner ads, sponsored influencer content.
This is not an ad for ads (you’ll notice this newsletter provides content ad free… for now). But it is the reality, and cannabis companies are no exception. A brand, retail store, or financial newsletter needs to stand out in a crowded space, and let the world know that they are here and open for business.
And we can’t! I say we, because I am a cannabis company.
But Liam, you make absolutely nothing on Money Puff and don’t seem to have any discernible business plan. Why would you say you are a cannabis company?
I wouldn’t — but Twitter would! I wrote previously about my Twitter advertising ban, despite the supposed changes to their policy. For what’s it worth, I also tried LinkedIn, the putative cannabis advertising haven, and was denied as well. It’s tough out there!2
So I especially sympathize with all the companies unfairly disadvantaged by this policy…
Sean Teehan with NY Cannabis Insider discusses the policy banning cannabis companies from advertising on billboards in the state (behind a paywall, sorry).
This newsletter is personally in favor of BANNING ALL BILLBOARDS, but if they’re here to stay then obviously weed should be up there. You can advertise a bottle of Jack Daniel’s to someone hurtling down the highway, for god’s sake. Eyes on the road, please!
Speaking of alcohol…
One of the unfair accusations lobbed at cannabis is that brands advertise to kids. We’ve talked about it before — it has to do with strains that have names like ‘Cookies’ and ‘Skittles’ and packaging that features cartoon characters.
The reason this is unfair is two-fold:
There’s little to no evidence that this is marketing targeting ‘kids’ and not just, you know, marketing.
Other industries with perceived harms to children can do this!
You know what was possibly the most ‘kid’ drink when I was growing up? Meaning the drink that, like, no self-respecting adult would drink because it’s just so preposterous as a beverage concept? That’s right — SunnyD!3
So I present to you, SunnyD… VODKA?!?:
If you’ve ever needed proof that ‘90s nostalgia is still in full force, there’s this: Today, SunnyD announced it is launching the SunnyD Vodka Seltzer. It's a smart strategic move, as kids who were raised on SunnyD commercials in the '80s and '90s can now legally drink the beverage with booze. Plus, the ongoing hard seltzer frenzy has shown no signs of slowing down.
When a toddler inevitably gets sloshed at daycare, Money Puff will be there to cover the securities fraud lawsuit. ‘They didn’t disclose the risk that parents could accidentally put this in the lunchbox.’
An IPO is like an advertisement for a stock. A company wants investors to know about their stock because it wants the investors to trade the stock. A liquid market in a stock — shares actively trading hands between investors — will allow a company to tap the public capital markets easily and relatively cheaply in the future.
There’s also the obvious benefit of the stock price going up, and there is a well-documented body of work on the ‘IPO pop’ in a stock. Though companies can’t really control their share price beyond normal corporate activities. Unless, of course, they get meme’d. Matt Levine has talked about this in the context of AMC and other companies that have cashed in actual dollars because retail investors sent their shares to the moon.
So here’s a cannabis company looking to advertise its stock more broadly:
TerrAscend Corp. applied to list its shares on the Toronto Stock Exchange (TSX), which would represent a step up to a larger exchange for the marijuana multistate operator.
A TSX listing for TerrAscend “would be the first major stock-market membership for a U.S. multistate operator,” according to Bloomberg News.
TerrAscend has offices in New York and Toronto.
Several other American cannabis MSOs are also listed on the Canadian Securities Exchange, but the TSX could offer benefits such as more liquidity and better access to institutional investors.
Some exchanges don’t want to take the risk of listing US cannabis companies, because cannabis is federally illegal.4 TSX, a major exchange, has historically been one of them. TerrAscend thinks they've found a way to get around those restrictions and list.5
This is known as ‘uplisting,’ and is generally a positive for thinly-traded, OTC stocks. However, today’s Cannabis Musings from Marc Hauser offers some good reasons why this might not actually be that much of a benefit for cannabis stocks, if they eventually do get listed:
Institutional Capital – this generally means investments from funds (hedge, venture capital, private equity, mutual), pensions, sovereigns, very high net worth families, insurance companies, banks, and the like. That’s compared to “retail investors”, regular zhlubs like me. Institutional capital doesn’t like illegal companies, unfortunately. Pensions are highly regulated and have very tight investment guidelines and policies. They not only invest directly, but are also significant investors into PE, VC, and hedge funds. Sovereign wealth funds generally don’t like cannabis because of the perceived vice. Funds are hesitant to risk their Federal licensing. This is why so much of the capital that’s been invested into the cannabis industry to date has come from high net worth (and not so high net worth) investors. Uplisting wouldn’t change this at all.
Clearing – this is the process whereby brokers settle up stock trades between each other. I won’t bore you with the details, but suffice to say, it’s a vital component to modern finance. It’s what allows you to go onto e-Trade and buy shares of, say, Bigfoot Project Investments (this was a real company and it did what you think it did!) with a click of a button, instead of having to deliver cash to someone in exchange for a physical stock certificate. The problem is that the major companies providing this service generally won’t “clear” trades in US cannabis stocks, making it harder, and thus less attractive, to trade these stocks. Uplisiting wouldn’t change this either.
Custody – most institutional investors are highly-regulated so they won’t steal their investors’ money or subject that money to certain risks. One way that’s done is by requiring institutional investments to be “custodied”, meaning basically that they’re held by brokers in separate accounts with specific reporting and limitations so those assets won’t be mixed with others. I think you know where this is going – major brokerage houses generally don’t like to custody, or even execute trades in, US cannabis stocks because they’re concerned about their Federal licensing, aiding-and-abetting, etc. Whether that’s rational or not, uplisiting won’t change this either.
Even listing on a major exchange might not save the #MSOGANG.
I’m not much of a journalist, but Jeremy Berke over at Cultivated is. Today, he talked about why PR is such a sticky topic in cannabis:
Few mainstream publications dedicate real resources to industry coverage, by hiring experienced reporters and giving them the tools and incentives they need to be successful on a challenging beat.
Cannabis companies themselves are locked out of the standard advertising channels like Google and Facebook, so they rely on getting the word out by getting quoted by friendly reporters — which means they have lots of budget for PR firms.
Many journalists covering the space don’t have traditional training in the same way that journalists covering other sectors do. Some end up as the witting or unwitting extensions of the PR machine.¹
This newsletter recently called out a puff piece it found particularly egregious. But, we get it — and sympathize. Thankfully, folks like Jeremy can help you cut through the noise. (Not a paid ad!)
Here’s some more great independent cannabis writing you should check out!
Less so for businesses that sell to other businesses, or businesses that provide some ‘essential’ service that a consumer finds through organic channels.
One possible explanation is platforms have a blanket ban on the word ‘stoner.’
Yoo-hoo is for adults, too!
Exchanges, despite the potential to just be a transaction-based money printing machine, do take risks. See: FTX, though of course there was a lot of fraud thrown in there as well.
There is apparently no good explanation out there about how TerrAscend will actually achieve this, but there is certainly a team of lawyers working on it.