MJBizMag February 2021 - 58

SPAC TO SQUARE ONE
Akerna, which was formed by the merger of SPAC company MTech Acquisition and MJ Freeway, celebrates listing on the Nasdaq exchange. Courtesy Photo
For example, a U.S. plant-touching
company that merges with a SPAC will
need to be traded on a Canadian stock
exchange, because the New York Stock
Exchange and Nasdaq will not list them
as long as marijuana remains illegal at
the federal level, Hauser noted.
Here are some tips for private cannabis
firms considering a SPAC merger:
* Make sure you have the audited
financials to qualify as a SPAC
candidate. The NEO exchange, for
example, requires three years of
audited financials before it will list
a company. That is a " box to check, "
according to Cohen.
* The cannabis company should
be a good fit with the SPAC. For
example, MJ Freeway possessed
the technical know-how, while
the SPAC it merged with, MTech
Acquisition Corp., brought a capital
structure resulting in a " classic winwin
scenario, " Billingsley said.
* The marijuana company's
management needs to convince the
SPAC it is at the top of its game.
" Quality management is always key, "
Cohen said. " At the end of the day,
we are partnering with company
management to drive future growth
and create meaningful shareholder
value, so everyone needs to be on
the same page. "
* Present a detailed road map to
the SPAC that includes a strong
financial plan, capital management,
product fit, innovation, connectivity
and flexibility, which are all
factors that " are important to the
DNA of a business, " Cohen said.
He also provided Marijuana Business
Magazine with a list of " red flags " for
cannabis companies looking at SPACs as
potential partners:
Illicit-market ties: Avoid any SPAC
whose sponsors have had any ties to the
illicit market.
Misguided forecasts: Make sure any
growth forecasts are realistic once the
marijuana company merges with a SPAC
and begins trading publicly.
Lack of details: Whether the
marijuana business is in retail, product
development or cultivation, avoid a
SPAC whose sponsors can't provide a
specific and innovative growth plan.
Financial inexperience: If the SPAC's
sponsors lack an understanding of capital
management, stay away.
58 Marijuana Business Magazine | February 2021
Debt: Too much of it is not investor
friendly.
STRIKING A MUTUALLY
BENEFICIAL DEAL
The right SPAC deal can be rewarding for
cannabis companies.
In one of the most recently completed
cannabis SPAC transactions, a New Yorkbased
limited partnership, Subversive
Real Estate Acquisition, said in October
it entered a binding agreement to acquire
15 marijuana-related properties in nine
states for $182.8 million in a move to
becoming a leader in the MJ real estate
investment trust (REIT) sector.
Subversive said it is one of the first
SPACs to become a publicly traded REIT.
It trades on the U.S. over-the-counter
market as SBVRF.
Entering the public market through
a SPAC transaction " should allow us
greater access to capital to continue to
grow our business and deploy capital
into a capital-starved industry, " Michael
Auerbach, executive chair and founder of
Subversive, said in a news release when
the deal was announced.
When Billingsley announced the
MJ Freeway-MTech SPAC about two

MJBizMag February 2021

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