Marijuana Business Magazine March 2019

March 2019 | mjbizdaily.com 51 Vertical Wellness already has sunk $60 million into its operations—capital raised through family offices and high-net-worth investors. The firm is now planning to list on the Nasdaq with a target of raising $50 million-$100 million ahead of going public as it works to scale its production and footprint. “We are well-positioned and believe we will be able to attract institutional capital and large hedge funds to back this endeavor,” Wallin said. SCALE AND CAPITAL ARE CRITICAL Vertical Wellness has inked farming contracts for up to 5,000 acres of hemp production that could yield an estimated $1 billion worth of CBD oil, Wallin said. The company is also investing in expanding its 90,000-square- foot facility in Kentucky to process hemp and produce a variety of hemp-based CBD products. “We plan to be the major ingredient provider to mainstream CPG companies,” he said. “The second (that) Nestle and Coke (enter the market), they are going to need incredibly large quantities of this product. We want to be in a position to be their reliable domestic source. “To be among the elite group of companies that are going to be able to do this at such a large scale, you need a lot of capital. It's a race to raise right now.” FUNDING FLOODGATES OPEN—SORT OF With the Farm Bill’s passage, hemp companies that include no marijuana connections are no longer on the list of operations banned from uplisting to the Nasdaq or the New York Stock Exchange—the world’s largest public exchanges. While the Farm Bill’s passage paves the way for hemp firms to tap public markets in the U.S. and larger pools of capital, making the move from a private company to a public firm is an enormous undertaking. Launching an IPO and listing on a major U.S. exchange require loads of financial disclosures, transparency and corporate responsibility. Companies considering going public should carefully consider the following: • Does your company meet the exchange requirements? For example, in order to list on the Nasdaq, firms must adhere to strict corporate governance rules and have a minimum of 1.25 million publicly traded shares at the time of their listing. • Firms that win approval for their public listing have often put in the hard work ahead of time on their private funding efforts. Companies should carefully consider how they market to institutions and these types of shareholders. Will your firm solely target institutional investors, or are retail investors allowed to participate? • Going public is a pricey venture, with legal fees and other costs. Firms can expect the move to easily carry a seven-figure price tag. — Lisa Bernard-Kuhn at the University of Kentucky, said not all crops are insurable and that it could be years before farm insurers settle on appropriate premiums. “When it comes to hemp, insurance companies aren’t going to have any idea what an average yield should be,” Mark said. “They’re going to need to see multiple years of data before hemp is a crop they’re able to insure.” The USDA may decide that farmers who have been participating in state- level hemp pilot programs can use state harvest data to build a policy, given that the agency doesn’t yet have its own numbers. But that hasn’t been settled. “There’s a lot we don’t know yet,” Mark said. While hemp producers wait to see what crop insurance options might be available, they can still take steps to position themselves to buy crop insurance if they wish. Mark laid out the first steps to getting federally subsidized crop insurance: • Find an FSA office: That’s the Farm Service Agency, the part of the USDA that oversees crop insurance. With more than 2,000 FSA offices nationwide, they are a first stop for farmers seeking crop insurance or any other government assistance. • Get a farm serial number: The FSA assigns each farm a number. Many states with hemp programs already require farmers to submit the locations where they’re growing their crop, but farm ID numbers may be new to some. • Take meticulous notes: It’s too soon to say how long it’s going to take for traditional crop insurance companies to cover hemp. But the better yield data and production stats you have, the better you’ll be positioned to seek coverage. • Call insurance companies anyway: Find out which companies sell insurance in your area for other crops—even if they express no While the federal government has cleared all states to implement hemp programs, not every state has embraced such a move. Photo by Media Collaboratory