One company wants to play in the big leagues, and it could mean more money for investors…
With cannabis being illegal under U.S. federal law, most marijuana firms have to list on over-the-counter markets. Executives at the NYSE and Nasdaq are allowing Canadian companies to list on their exchanges because those companies operate a business that is legal under Canadian law.
But KushCo Holdings Inc. (OTC: KSHB), a California-based company, is trying to make an important move and get listed on the Nasdaq. KushCo doesn’t touch the plant. Instead, it provides packaging and consolation services to the industry. That’s one strategy to get in on the big action.
In the eyes of the Nasdaq, that should make it seem like less of a risk than approving a U.S. cannabis grower to list on its exchange.
Now, our members who own KushCo may wonder what they have to do when the shares go from over-the-counter to the Nasdaq.
The easy answer is nothing. You will still own the same amount of shares, and the shares will trade as normal.
You can just sit back.
However, in terms of what this means for the cannabis company itself, it’s significant.
Bigger Markets and More Money
Being on the NYSE or Nasdaq means more prestige, more eyeballs on your company, and more legitimacy.
When a stock gets uplisted, there’s a list of likely institutions that wanted to buy the stock before, but were unable or willing to buy it from a lower-level exchange. OTC stocks don’t have the liquidity people, like hedge fund executives, want to see.
Mutual funds and pension funds also avoid lower-level exchanges for the same reason.
By that, I mean it’s harder for a hedge fund to place an order for millions of shares at a price it wants, and it’s even harder to get out of a position because there just aren’t enough buyers. Fortunately for us, we don’t have that problem when buying OTC stocks because we have smaller trades that can get filled.
So, thanks to being on a bigger exchange, a company can start attracting more big-time investors. I know I keep harking on this, but I want all of our members to understand how everything will shake out.
A stock price without big institutional investors can be volatile.
That’s why you’re not going to see shares for Procter & Gamble Co. have wild 20% price swings in a single day.
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The Vanguard Group, an investment management firm with $5.3 trillion in assets under management as of September 2018, owns 214 million shares of Procter & Gamble.
And that’s what I mean about prices being stable. With so many shares, you know Vanguard isn’t going to make any rash decisions. Even if retail investors panic for some reason and try to sell their shares of P&G, it won’t match up to the amount of Procter & Gamble stock the Vanguard Group holds.
We’re getting to that point of institutional investments creating stability. We’ve even seen the Church of England dip its toes into medical marijuana investments.
The dominoes are falling, and the shining moment will be when institutions like the California Public Employees’ Retirement System, the State of Wisconsin Investment Board, and Goldman Sachs Asset Management start putting billions into cannabis stocks.
Think about how much more the shares you own today will be worth when these big institutions want to own what you already have.
Executive Director, National Institute for Cannabis Investors
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11 responses to “What to Do When a Company Goes from the OTC to the Nasdaq”
July 15 2019