The Value of Compliance for Publicly Traded Cannabis Companies

September 29, 2020
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The Value of Compliance for Publicly Traded Cannabis Companies

When we founded iComply in Colorado in 2011, much was still very unknown about how each State would be treated by the Federal Government regarding cannabusiness. Back then, strict DOJ guidelines controlling investment made out-of-State investment non-existent. However, following the national legalization of Canadian recreational marijuana, publicly traded companies are alive and well in the cannabis industry. The value of compliance for publicly traded cannabis companies can pay in dividends.

Many of those Canadian funds currently invest heavily into US based cannabis businesses. As States like Colorado ease up prohibitions on out-of-State investment, companies are experiencing an influx of M&A activity, IPO’s, and consolidation in public markets. Cannabusiness owners get a chance to enter publicly traded markets. Investors appreciate proof that company operate above-board and in compliance with the law. 

Compliance Value: Mitigating Risk

Publicly traded companies experience massive risk in the cannabis industry due to several reasons. Fluctuation of markets, losses due to over-speculation, and challenges running cannabis companies across multiple marketplaces and locations only represent a few risks inherent to the industry. The upside for these companies is instant: value, the ability to raise capital quickly, and potentially massive returns on investments all make the cannabis industry very attractive to savvy investors.

Compliance companies like iComply assist in creating this value. We increase value immediately by providing shareholders with clear, transparent, results from compliance measures.

The market currently presents a world of competition against other public companies for stockholders. Compliance validation enforces brand value with businesses and stockholders. Compliance reports also work to mitigate risk at the organizational level. Accordingly, clear, transparent results from compliance measures remind all stakeholders compliance budgets act as an investment into their public stock.

Working with companies like iComply generate value for the stock market and its capital-generating public press releases by adding legitimacy. The nature of the public market is volatile, and compliance tames the beast. iComply works with our clients to create legitimacy and mitigate risk. We do this by providing consistent, third-party validated measures of internal operations and controls. These reports help organizations assess themselves and also communicate clearly about internal business operations to investors with confidence. 

The Value of Accountability

Unfortunately, the overspeculation of markets caused many public companies to lose millions over time as they expended capital and fell short of revenue expectations. No savvy investor wants to buy a time bomb of negative potential investment – especially if compliance is not closely considered. When compliance measures exist in a company, investors have peace of mind regarding their investment.

Furthermore, as publicly traded companies enter marketplaces, they deal with a plethora of US regulations. iComply services help protect C level executives by providing accountability. Specific to SARBOX compliance, iComply helps provide an additional layer of protection for cannabis businesses by documenting accountability to revenues, books, and records.

To complicate cannabis industry challenges further, unlike Canada, the US cannabis industry faces much more than 7 territories and Federal regulation. For instance, each marketplace in the US has specific regulatory requirements that differ. As well, US cannabusinesses receive zero Federal oversight outside of OSHA, EPA, and IRS requirements.

iComply has publicly traded companies covered on these Federal and State-Specific cannabis compliance considerations.

Compliance Value: Peace of Mind

For public companies looking to satisfy shareholders beyond initial capital expenditures and losses, building long-term is critical. Often, this requires companies to prove their value to stakeholders. By providing validated compliance efforts through iComply 3rd party reports, we help public companies prove an ROI on investing in compliance. Communicating consistent quality, operations, and reduced risk can be essential to investors and business owners alike.

Investing in compliance acts not just a savings in legal fees, but a peace of mind for shareholders. Receiving reports of integrity in transparency to proven operations regarding compliance encourages investor confidence. True compliance in every other established and heavily regulated industry requires third party validation of policies and procedures for everyone. From the CEO to shareholders, management, and staff, the benefits exist at every level of the business.

Remediation Documentation Value

Further, should a violation occur, or other legal engagement (such as a product liability lawsuit), proper SOPs and audits of surrounding operations may mitigate damages. Companies with a proven track record of “following the rules” stand better positioned for defense. Naturally, this essential component often proves critical for ambitious public companies in cannabis. Operating with integrity and transparency legitimizes companies in an industry that often has a target painted on their back from multiple shareholders and the public eye alike.

Normally, shareholders intuitively know this and are more likely to invest in companies that differentiate themselves with proven track records. Every time iComply validates a cannabis company through one of our compliance package services, we are helping our clients build a documented history of their compliance efforts. We’re dedicated to legitimizing the cannabis industry through our services, and we help clients prove compliance.

Compliance Value: Differentiation from Competition

Beyond satisfying the public markets, regulators, and executives through immediate valuation among shareholders, iComply helps differentiate public companies from their competitors. We often vet deals targeted for acquisition or mergers. iComply stands ideally positioned as long-term strategic partners in public cannabis companies. Additionally, we’re especially suited to working with companies looking to expand and manage their operations effectively among multiple markets.

We encourage public companies to budget for each new addition to their portfolio. As well, we help tie in a myriad of different regulatory requirements from different agencies. We help our clients build a cohesive and comprehensive compliance management infrastructure for every licensed cannabis facility our clients operate. The value of compliance for publicly traded cannabis businesses exists and has become more important than ever. 

We do so as the most experienced cannabis compliance company in the game. iComply leads with transparency and excellence. We help take compliance-focused public companies to the next level worldwide.