The U.S. Securities and Exchange Commission has allowed a share registration to proceed for a company whose business model includes the cultivation and sale of marijuana, which is illegal under both federal law and some state laws.
California based Terra Tech Corp. (TRTC: OTCQB) recently received approval for its disclosures and the registration of its shares. Also, another company that is planning to cultivate and sell marijuana has an application pending with the SEC.
This approval appears to be the first green light for a share registration by a company in this line of business and could set a precedent for marijuana dealers to access the equity markets. Due to the way the SEC handled the share registration, there are questions floating around regarding whether or not the SEC understands what they just did or what the company’s business model is.
Not only does this approval represent a huge victory for publicly traded marijuana companies and appear to be the first of its kind, it also sets a significant precedent for marijuana businesses to access the equity markets.
On January 6th, 2015 TRTC secured an equity line with Magna Equities II, LLC. Here are the highlights of the deal:
Terra- Tech obtained a committed equity line under which it may from time to time sell up to 57,000,000 shares of its common stock to Magna Equities II, LLC over a 24-month period following the effectiveness of a re-sale registration statement that Terra Tech filed with the Securities and Exchange Commission on December 24, 2014. Terra Tech will determine, in its sole discretion, the timing, price and amount of the draws. The purchase price of each share will be equal to 95% of the market price during the five consecutive trading days immediately preceding the date of the applicable draw down, with the market price equal to the average of the three lowest VWAPs of the common stock in the five trading day period immediately preceding the date of the applicable draw down notice. Terra Tech intends to use the net proceeds from any sale of common stock under the equity line to execute its growth strategy, to aid in the commercial development of its subsidiaries, and for general corporate purposes. In connection with its execution of the equity line documents, Terra Tech issued 416,667 shares of its restricted common stock to Magna as a commitment fee.