Eaze Stock on the Horizon?
While Canadian marijuana stocks are dominating the market at the moment, many investors are interested in discovering what the first U.S. pure-play marijuana stock will be. Some believe that Eaze could be that company. The possibility of an Eaze IPO has sparked interest across the industry, with Eaze stock hoping to make a big splash should it land this year. But how likely is that?
First, let’s cover the basics. How does Eaze work?
Often called “the Uber for Weed,” Eaze is a fast-growing cannabis delivery start-up that operates in the Bay Area and San Diego.
Its numbers are impressive, having grown 300% in 2017.
The company has also begun shipping all manner of marijuana-related goods besides the bud itself.
It claims to be doing over 120,000 deliveries per month, as of the end of 2017. The company received a cash injection of $27.0 million from investors last September. (Source: “About That Joint: Marijuana Start-Ups Pass,” The New York Times, January 24, 2018.)
On paper, there’s a lot to like about an Eaze IPO. The marriage of tech with marijuana puts two of the most exciting industries on the market together in a neat little package.
Does that mean that Eaze stock is on the way, though?
In my view, it’s still a few years away from going public.
Will Eaze IPO in 2018?
Ultimately, I think an Eaze IPO in 2018 is highly unlikely.
While the company would likely be able to drum up enough support for its IPO, the problem with Eaze stock is legal more than anything else.
Marijuana is still federally illegal. For a company to be hosted on an exchange, it would have to comply with the laws of the land. Considering marijuana technically occupies a legal gray area, it’s unlikely that Eaze will want to jeopardize its market position by going too early to market while the legal situation surrounding pot is still being sorted out in the U.S.
Not to mention that there’s a good chance that the major listings will reject the company due to its ambiguous legal standing.
Another issue with Eaze stock is that the company is small and burning a lot of cash at the moment.
While it has stated its lofty goal of shipping the equivalent of $1.0 billion in cannabis products per year by 2020, it is spending about $1.0 million a month to get there. (Source: “The startup burning $1 million a month in hopes of selling $1 billion of pot a year,” MarketWatch, September 5, 2017.)
To make matters worse, even if marijuana is legalized on a federal level in the U.S., that doesn’t mean the legal questions are all answered.
Some counties and cities, for instance, have instituted bans on marijuana shipping. It would have to face an uphill battle, not unlike Uber had to, in its introduction across the country.
But whereas Uber was more an economic and safety question, Eaze would have to face off against moral naysayers across the country.
There just isn’t enough incentive for an Eaze IPO in 2018.
While the company is certainly riding high in the media’s eye—and in the eyes of a number of investors—the bevy of open questions surrounding the company, from legal ramifications to concerns about its cash-burn rate, will likely put off the introduction of Eaze stock.
“Is Eaze publicly traded?” is likely to be a phrase you hear a lot moving forward. The excitement and potential are there.
But an Eaze IPO is likely still a few years off.