The last few months have been extremely busy for MassRoots (MSRT) and things are only going to get busier.
MassRoots took a major step forward and will be able to significantly expand its platform’s capabilities after it announced the acquisition of CannaRegs, a leading technology platform that tracks changes in cannabis regulations and taxation at the municipal, state, and federal levels.
In an all-stock deal, MassRoots will acquire CannaRegs valued at approximately $12 million.
A Cash Flow Positive Accretive Acquisition
In 2014, CannaRegs was founded by former Federal Reserve regulator Amanda Ostrowitz. The company is a cash-flow positive and debt-free company with more than $450,000 in contractually-obligated annual revenue.
CannaRegs will play a key role in MassRoots capitalizing on California’s recreational marijuana market. The cannabis regulation platform is one of the most widely used services due to its ability to help cannabis businesses remain compliant.
The acquisition enhances and expands MassRoots’ compliance offerings and houses them in one centralized platform. The combination of these services with MassRoots’ data and extensive relationships will be a major catalyst for revenue growth and we are bullish on the potential growth opportunities.
A Strategic Combination
These businesses have benefited from the complex nature of the legal cannabis industry in the United States and the combination of the two cannabis tech firms is powerful.
While MassRoots has gained from the absence of advertising opportunities, CannaRegs has benefited from states such as California with hundreds of jurisdictions each with different regulations, tax rates, and zoning laws related to the cannabis industry.
The onset of recreational marijuana in California has created a significant opportunity for the two companies and when you add Odava into the mix, the MassRoots platform is even more attractive.
Value-Add M&A Activity Further Enhances MassRoots’ Value
This comes only a few months after MassRoots signed a definitive merger agreement with Odava, Inc., a leading regulatory compliance platform for the cannabis industry. This move was significant since MassRoots will be able to provide regulatory compliance, point-of-sale and consumer engagement programs for the cannabis industry.
While MassRoots is a cannabis social network that serves more than one million users, the CannaRegs software-as-a-service (SaaS) enables dispensary owners, law firms, investors, consultants, and municipalities to track in real-time cannabis regulations, both implemented and proposed so as to remain compliant with state and local laws.
In January, MassRoots acquired Whaxy, an online order-ahead and menu management platform. When completed, the CannaRegs acquisition will enable businesses to easily update their operational procedures and report to regulators through the MassRoots platform.
An Execution Story
Although MassRoots has significantly improved its platform as well as the services it provides, the shares are down more than 50% in 2017. We are favorable on the acquisitions and partnerships made over the last year and believe they have de-risked the company’s story.
MassRoots started out as a technology platform focused on helping cannabis businesses advertise given that outlets such as Facebook (FB) and Google (GOOGL) restricted such advertisements. Over the last year, MassRoots has pivoted its focus towards opportunities where it can leverage its user base and its relationships.
A key factor that supports MassRoots’ entrance into new markets stems from its massive user base and its relationships. We are favorable on this development and believe the combination of the two firms will create one of the most advanced and comprehensive technology platforms for dispensaries and large scale cannabis firms.
Source: Technical 420