- MSRT shares lost 30% in recent weeks due to uncertainty in how the new administration in Washington will deal with the rapidly growing legalized cannabis industry in the U.S.
- However, Attorney General Jeff Sessions took a much more pragmatic stance on the cannabis industry in the U.S. just yesterday
- Expect shares of MSRT to rally in the coming days/weeks on yesterday’s clarification that erases much of the uncertainty that the market hates
- MSRT shares are bouncing off the 200-day moving average of .78 and look prime for a breakout
- MSRT is experiencing high sales growth and expects to be cash-flow positive in near term
Cole Memorandum and Legal Cannabis in the U.S.
Essentially, the Cole Memorandum states that jurisdictions that have legalized marijuana in some form are less likely to be a threat to the federal priorities under the CSA if they have implemented strong and effective regulatory and enforcement systems to control marijuana growth and distribution. The Cole Memo also gives wide prosecutorial discretion whether to prosecute state legal marijuana enterprises and hinted that it is probably not efficient use of federal resources to focus enforcement on state legal businesses.
In an appearance yesterday before local, state and federal law enforcement officials in Richmond, Virginia, Attorney General Jeff Sessions stated that:
“The Cole Memorandum set up some policies under President Obama’s Department of Justice about how cases should be selected in those states and what would be appropriate for federal prosecution, much of which I think is valid.”
Sessions also indicated that the Justice Department doesn’t have the resources to enforce federal prohibition in states across the country.
This is a major shift from the Attorney General’s previous statements on legalized cannabis in the U.S., statements which strongly contributed to a weakness in MSRT shares.
MassRoots Inc. (web site) is one of the largest and most active technology platforms for cannabis consumers and businesses with over 900,000 registered users. It’s “Yelp for Cannabis” mobile applications aim to connect its passionate community with the best products and dispensaries in their neighborhoods.
We see exciting opportunity ahead for this business considering:
- 28 states have legalized marijuana for medical purposes
- MSRT is targeting a $7.2 billion cannabis market that is expected to grow to $23 billion by 2020
- rapidly growing advertising revenue stream now count Uber and Univision as paying advertisers
- 900,000 registered user base is growing around 30,000 new users organically per month, which does not consider new product roll-outs about to occur, the Ohio market opening up next year, or the wave of new states to join the legalization trend
- per month costs are currently running $300,000 per month with $150,000 of revenue, but the gap is on track to close by year end 2016
- a vast array of ancillary business opportunities for the management team, as demonstrated by the recent Flowhub investment
We believe MassRoots will grow rapidly to over $120 million in market capitalization versus the $65 million current market cap considering the business has over 900,000 users and is experiencing extremely rapid growth. Weedmaps was valued at $300 million with only 750,000 users. Leafly was valued at $425 million with only 1 million users.
MSRT at a glance:
Shares outstanding: 78.9 million
Approximate float: 40.5 million
Current Price 3/16/2017: .81
Market Capitalization: 65.2 million
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The legal marijuana market is a booming industry that is experiencing record growth. States continue to expand both medical and adult use in the US. According to ArcView Market Research, the US. cannabis market was $5.7 billion in 2015 and is expected to reach $7.2 billion at the end of 2016. By 2020 the market is estimated to reach over $23 billion with a compound annual growth rate of 32%.
The 2016 elections put in place new cannabis laws affecting 22% of the U.S. population, a fundamental growth catalyst for MassRoots.
More States Expected to Legalize Medical and Recreational Cannabis
Isaac Dietrich, Chairman & CEO of MassRoots stated in a December letter to shareholders,
“Throughout the next two years, we expect five additional states will pass medical cannabis laws: Texas, Louisiana, Utah, Nebraska and South Carolina while an additional five states will pass recreational cannabis laws: Michigan, Maryland, Vermont, Connecticut and New Jersey. We expect that, with the exception of Michigan, these laws will be passed through the state legislature which is a fraction of the cost of running a statewide ballot initiative. Sitting at the intersection of healthcare on the medicinal side and a vice industry on the recreational side, we believe the cannabis industry can continue to grow in any economic climate.”
In a very short period of time, MassRoots has grown its user base to over 900,000 and adds approximately 30,000 users per month. The massive community of the world’s top cannabis enthusiasts collectively engage over 300,000 times per day on the network. Average daily mobile users is 1750,000. The website gets about 200,000 unique visitors per day, and we are told the platform can easily handle 1 billion unique visitors/day. The company has 10-15% of the addressable market in Colorado. Ohio is coming online next year and the company is eager to expand. Customer acquisition costs have been around $0.80 but are now lower. Revenue per user is targeted to soon be running around $1.00.
MSRT Recent Positive Highlights
Retired All Remaining Convertible Debt
Raised over $2.9 million through warrant exercises so far in 2017, almost entirely from the exercise of the Company’s $0.90 warrants, giving MassRoots its strongest cash position in corporate history
Reinstated in Google Play and the launch of display ads on its Andriod applications in February 2017, growing the Company’s revenue channels.
Completed acquisition of DDDigtal, d.b.a. “Whaxy,” an online order-ahead and menu management platform. Since launching in May 2016, Whaxy’s online ordering platform has processed over $7 million in volume across 60,000 unique transactions
- Added Mr. Tom Angell as the Company’s Senior Political Correspondent in early February 2017 and has since increased its blog traffic by nearly 18% and received comment from White House Press Secretary Sean Spicer
- Plans to launch its revamped website in early March 2017, in anticipation of its annual web traffic surge ahead of the 4/20 cannabis holiday
- Targeting market share to 25-35% of cannabis consumers in regulated cannabis markets during 2017
By focusing on community-driven reviews rather than static information, MassRoots believes it will enable users to find the best products in the shortest amount of time. MassRoots’ recurring usage and the ability to push additional services as features rather than standalone apps presents a superior value proposition to users than both WeedMaps and Leafly. WeedMaps a dispensary locator founded in 2007. It has 750,000 users (as of April 2015), a valuation of $300 million (as of June 2014) and $25 million estimated revenue for 2016 (as of April 2015). Leafy a strain resource guide founded in 2010. It has 1 million users (as of October 2015), a valuation of $425 million (Privateer Holding company of Leafly raised in April 2015) and $16 million estimated revenue for 2016.
Shares of MassRoots (MSRT) were hit hard in recent weeks due to market uncertainty in how the new administration in Washington would approach the cannabis industry in the United States. Clarity from Attorney General Jeff Sessions yesterday is a welcome development, and MSRT shares should find support at the 200-day moving average of .78. With continued strong sales growth, near term expectation to turn cash-flow positive, retirement of all convertible debt, and the strongest cash position in corporate history, MassRoots has a solid financial footing to execute its business plan.
See also December 2016 Investor Presentation