The road to taking a company public is loaded with landmines, detours, and obstacles, but if successfully navigated, it can provide businesses with significant capital to accelerate growth, fuel expansion, and increase market share. In short, the steps to taking a company public can be challenging, but if properly executed, the rewards can be handsome.
A company called Adnant has been quietly taking cannabis (and non-cannabis) companies public for almost 10 years. With more expertise in the cannabis arena than virtually anyone, Adnant has been integral in preparing companies to go public for some of the most notable brands in the industry, including Blum Dispensaries, WeedMaps, Terra Tech, and most recently, MedMen.
Sabas Carrillo, Managing Partner of Adnant, said that there are 5 vital components to successfully taking a company public.
1. Assemble a great team. “No single company has the resources to provide all the elements necessary to successfully take a company public,” he said. It will take a team of lawyers, auditors, accountants, and consultants to bring the vision to fruition. Today, with many companies doing business both in the United States and Canada, it may take experts in both countries working together to put all of the pieces in their proper place.
2. Create a Road Map. “This can be a challenging journey, with a tremendous amount of work that needs to be done within a very short period of time,” Carrillo said. Make certain that you have a plan that outlines all of the many steps that you will need to take. It pays to work with experts that have gone down this path many times before. Taking a company public can be costly and requires specific expertise. If you can’t afford to hire experts, you can’t afford to take your company public. This is no place for do-it-yourselfers.
3. Develop Grit. “Expect many sleepless nights,” Carrillo said. The timetable for taking a company public via a reverse merger or a reverse takeover is usually an intensive 3-6 months, but it is filled with about 2-years worth of work. If you can’t stand the heat, don’t step into the kitchen. There are countless forms, regulations, financial documents, comments and answers that need to be addressed when taking a company public. With the right team, these become a routine part of the process, but are time-consuming, and require a steady hand to guide the company through what may seem like rough waters.
4. Build out the Accounting Department and Infrastructure. This is where many companies get tripped up, Carrillo said. “Executives have rightly been focused on building their business, but it takes a robust accounting department to support a fully reporting public company,” he said. If you can’t get your reports ready within 10 days of the end of each quarter, then you’re not ready to go public. Take the time to build out the accounting infrastructure before you go down the road to taking your company public.
5. Plan for the Next Steps. Going public is not the end of the road, it is a beginning of a new pathway. “Plan for the next steps, such as mergers and acquisitions, or a capital raise to fuel expansion such as a build out of a grow operation, or setting up new locations,” Carrillo said. “Long term planning and thoughtful strategies are key to success in any business, but are all the more important in a publicly traded companies.”
As the cannabis industry continues to gain traction, and investors pour more money into the sector, it makes sense for some companies to transition from private to public. However, like all good things, it takes work, perseverance, and expertise to successfully navigate the road to a public listing. Most importantly, it takes a team of experts with experience in the process to make this vision a reality.