Marijuana investor Privateer raises $40 million on eve of U.S. elections

A variety of medicinal marijuana buds in jars are pictured at Los Angeles Patients & Caregivers Group dispensary in West Hollywood, California U.S., October 18, 2016.   REUTERS/Mario Anzuoni/File Photo

Marijuana private equity investor Privateer Holdings has raised $40 million in convertible debt ahead of next week’s elections, with pot legalization on the ballot in nine U.S. states.

Several investors rushed to place their funds, while others held back to wait for the election results.

Of the nine states that will vote on Tuesday on legalizing medical or recreational marijuana, California ranks as the most important.

The most populous U.S. state is considering allowing recreational adult use.

If the measure passes, it is expected to legitimize part of a multi-billion-dollar black market and open new opportunities for companies ranging from software to pot delivery.

Financial services firm Cowen and Co forecasts a $50 billion U.S. market in a decade, up from $6 billion in legal sales today.

U.S. law prohibits marijuana but federal agencies so far have limited their enforcement effort for companies which follow local laws in states that have legalized pot.

Seattle-based Privateer is one of several funds and investment companies targeting marijuana businesses. It said investors were divided on when to make their moves.

“Most of the potential lead investors wanted to wait until after next Tuesday to invest,” Chief Executive Brendan Kennedy said in an interview.

Others were ready to invest, but it was difficult to agree on how to value Privateer, with the outcome of the state votes unclear. The presidential race was a secondary issue, he added.

“This is a way to sort of take capital from investors without having to negotiate the price,” he said. Privateer hopes to raise $100 million in the next round, including the notes.

 

The valuation of the company will be set when the round closes, and convertible note holders will get a 15 percent discount when they get equity in Privateer, he said.

The company plans to put more than half of the round in companies outside the United States, including Canada and potentially Australia, he said.

(Reporting by Peter Henderson; Editing by Leslie Adler)

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Why Potential Marijuana Investors Should Study Wiretapping

Rich Smith       Aug 4th 2014 9:22AM

Once upon a time, AT&T (T) urged its customers to “reach out and touch someone” with a long-distance phone call (which Ma Bell could charge extra for at the time). Those were simpler times.
Today, in our post-9/11 world, if you reach out by phone, you may end up touching more people than you bargain for. And those people may have guns, badges and court-approved wiretap warrants.

Top States for Wiretapping
This is especially true in Nevada, Colorado, California and New York. A recent report by the Administrative Office of U.S. Courts said these four states issue the majority of wiretap authorizations in America (measured proportionate to their populations):

  • Nevada authorized 38.2 wiretap authorizations per 500,000 residents
  • Colorado authorized 12.4 per 500,000
  • California authorized 11.7 per 500,000
  • And New York State authorized 10.7 per 500,000

Rounding out the top 10 states for state-sanctioned wiretapping are Arizona, Georgia, Kentucky, Maine, Missouri and New Jersey — in that order. In each state, state and federal law enforcement sought and received authorizations to conduct more than six wiretaps per 500,000 residents. (In case you were wondering, that office points out that it is not authorized to collect and report data on NSA wiretaps regulated by the Foreign Intelligence Surveillance Act of 1978).
According to Pew Research, which analyzed the report, 90 percent of the wiretaps authorized in 2013 were authorized to investigate “criminal drug-related offenses.”
The 3,576 total wiretaps authorized resulted in 3,744 arrests (more than the number of wiretaps authorized). But the conviction rate from these wiretaps was less than 19 percent — just 709 convictions. (Curiously, AO also notes that in all of 2013, only one application for a wiretap was turned down.)
If that sounds bad, it is. According to a 2010 annual statistical report filed by the Justice Department’s Executive Office for United States Attorneys, the average conviction rate in the federal criminal judicial system for that year was 93 percent.

What It Means to Investors
But we digress. To find out how all of this may be relevant to investors, let’s return to the 90 percent figure. You’ll notice that while Nevada is the No. 1 state for wiretapping, No. 2 is Colorado — a state which in January decriminalized the recreational use of marijuana.
Now, there’s been a lot of talk lately about the opportunities that marijuana legalization — first in Colorado, and more recently in Washington state — might offer for investors. Over the past year, shares of GW Pharmaceuticals (GWPH) have risen more than eight times, and microcap Advanced Cannabis Solutions (CANN) have more than tripled in value. Small cap Medical Marijuana (MJNA) has risen 50 percent.
Still, the fact remains that even if individual states are beginning to move toward legalization, the federal government and its Drug Enforcement Administrationstill consider marijuana an illegal drug, period. Until this changes, the fear of federal prosecution of a state-legal drug therefore still hangs over this industry.
Reading the Tea Leaves at the DEA
What will be our first clue that the DEA has begun backing off enforcement of drug laws in places like Colorado, where the state strictures are loosening? It could be this AO report we’ve been talking about up above. Let’s quickly run back down the list of what we know:

  • Colorado is one of the states most active in issuing state and federal wiretap authorizations.
  • Nine out of 10 such wiretaps concern drug offenses.
  • Colorado no longer finds marijuana as offensive as it used to.

It will be interesting to watch what happens to Colorado’s rank on the list of most frequent wiretappers when the AO issues its report on 2014 wiretap authorizations next summer. If Colorado falls a lot from No. 2, this could mean that law enforcement has decided to back off from prosecuting (at least marijuana-related) drug offenses in the state.
Such a development would bode well for marijuana stocks as more and more states vote to legalize, suggesting the DEA will bow to local interpretations of the drug laws.
If, on the other hand, Colorado continues to rank highly in the wiretap ratings — look out. That will be our first clue that the heat is still on.

Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned either.

CONTINUE READING…

Why Potential Marijuana Investors Should Study Wiretapping

Rich Smith       Aug 4th 2014 9:22AM

Once upon a time, AT&T (T) urged its customers to "reach out and touch someone" with a long-distance phone call (which Ma Bell could charge extra for at the time). Those were simpler times.
Today, in our post-9/11 world, if you reach out by phone, you may end up touching more people than you bargain for. And those people may have guns, badges and court-approved wiretap warrants.

Top States for Wiretapping
This is especially true in Nevada, Colorado, California and New York. A recent report by the Administrative Office of U.S. Courts said these four states issue the majority of wiretap authorizations in America (measured proportionate to their populations):

  • Nevada authorized 38.2 wiretap authorizations per 500,000 residents
  • Colorado authorized 12.4 per 500,000
  • California authorized 11.7 per 500,000
  • And New York State authorized 10.7 per 500,000

Rounding out the top 10 states for state-sanctioned wiretapping are Arizona, Georgia, Kentucky, Maine, Missouri and New Jersey — in that order. In each state, state and federal law enforcement sought and received authorizations to conduct more than six wiretaps per 500,000 residents. (In case you were wondering, that office points out that it is not authorized to collect and report data on NSA wiretaps regulated by the Foreign Intelligence Surveillance Act of 1978).
According to Pew Research, which analyzed the report, 90 percent of the wiretaps authorized in 2013 were authorized to investigate "criminal drug-related offenses."
The 3,576 total wiretaps authorized resulted in 3,744 arrests (more than the number of wiretaps authorized). But the conviction rate from these wiretaps was less than 19 percent — just 709 convictions. (Curiously, AO also notes that in all of 2013, only one application for a wiretap was turned down.)
If that sounds bad, it is. According to a 2010 annual statistical report filed by the Justice Department’s Executive Office for United States Attorneys, the average conviction rate in the federal criminal judicial system for that year was 93 percent.

What It Means to Investors
But we digress. To find out how all of this may be relevant to investors, let’s return to the 90 percent figure. You’ll notice that while Nevada is the No. 1 state for wiretapping, No. 2 is Colorado — a state which in January decriminalized the recreational use of marijuana.
Now, there’s been a lot of talk lately about the opportunities that marijuana legalization — first in Colorado, and more recently in Washington state — might offer for investors. Over the past year, shares of GW Pharmaceuticals (GWPH) have risen more than eight times, and microcap Advanced Cannabis Solutions (CANN) have more than tripled in value. Small cap Medical Marijuana (MJNA) has risen 50 percent.
Still, the fact remains that even if individual states are beginning to move toward legalization, the federal government and its Drug Enforcement Administrationstill consider marijuana an illegal drug, period. Until this changes, the fear of federal prosecution of a state-legal drug therefore still hangs over this industry.
Reading the Tea Leaves at the DEA
What will be our first clue that the DEA has begun backing off enforcement of drug laws in places like Colorado, where the state strictures are loosening? It could be this AO report we’ve been talking about up above. Let’s quickly run back down the list of what we know:

  • Colorado is one of the states most active in issuing state and federal wiretap authorizations.
  • Nine out of 10 such wiretaps concern drug offenses.
  • Colorado no longer finds marijuana as offensive as it used to.

It will be interesting to watch what happens to Colorado’s rank on the list of most frequent wiretappers when the AO issues its report on 2014 wiretap authorizations next summer. If Colorado falls a lot from No. 2, this could mean that law enforcement has decided to back off from prosecuting (at least marijuana-related) drug offenses in the state.
Such a development would bode well for marijuana stocks as more and more states vote to legalize, suggesting the DEA will bow to local interpretations of the drug laws.
If, on the other hand, Colorado continues to rank highly in the wiretap ratings — look out. That will be our first clue that the heat is still on.

Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned either.

CONTINUE READING…