Jordan Greentree - Flickr Creative Commons

Controversy Brews As Marijuana Makes Its Way To Wall Street

Jordan Greentree - Flickr Creative Commons

 
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by Russ Belville

on December 22, 2014

As marijuana continues its inevitable return to legality, entrepreneurs are scrambling to take their fledgling pot companies public to trade on the stock market.  Now one company, Terra Tech Corp. of Irvine, California, is poised to make that leap to financial legitimacy. However, questions about the company’s prospects, its CEO, and its hijacking of established marijuana brands may kill Terra Tech’s shot at the big board.

Terra Tech was approved last week by the Securities and Exchange Commission (SEC) to raise $6.8 million to build medical marijuana operations in Nevada.  The state provisionally issued Terra Tech two cultivation licenses, two production licenses and four dispensary licenses, one of which is in Las Vegas.  Terra Tech’s CEO, Derek Peterson, explained to Mashable.com that the SEC told him they can only make investors aware of risk.  “In the end they kind of told us that, statutorily, they can’t tell us what to do in the space we’re in,” said Peterson.

Peterson and the company have come under intense scrutiny from stock analysts.  Before leaping to the stock exchanges, Terra Tech has been traded over-the-counter (OTC) as a “penny stock,” where the rules of disclosure and transparency found in the public markets like New York Stock Exchange and NASDAQ don’t exist.  The financial website Seeking Alpha has profiled Peterson and Terra Tech, explaining how Peterson was fired by Morgan Stanley, where he worked as a financial analyst, for not disclosing his side business in the marijuana industry.

Seeking Alpha also questions why Peterson, as a supposed talented financial analyst making “$300,000 to $400,000 annual salary at Morgan Stanley,” according to Huffington Post, filed for personal bankruptcy protection in 2012.  As for Terra Tech, Seeking Alpha portrays their business as a “pump-and-dump” and “a massive stock promotion,” in which insiders tout worthless shares of stock to boost the price so they can sell it at a far higher price than it is actually worth.

While the mainstream has questions about Terra Tech’s financials, Derek Peterson is accused of trademark infringement within the marijuana community. The infringement accusation is over Derek Peterson’s venture with Oakland dispensary owner Salwa Ibrahim, a cannabis brand called IVXX (Roman numerals for 4 and 20; 420 would be “CDXX”).  Discussing the brand, Huffington Post announced: “This Could be the Next Major Legal Marijuana Brand,” referring to Terra Tech’s Facebook page where a picture is posted of a full page glossy magazine ad for IVXX.

The infringement accusation comes via Bianca Barnhill, executive producer of the drug war documentary, The Culture High.  Barnhill is the niece of High Times magazine general counsel and director Michael Kennedy and has been the magazine’s West Coast correspondent. She is also the founder of the cannabis lifestyle brand IVXX, which she has been promoting actively since 2013.  Through her Twitter account, @MizzBarnhill, she explains that Peterson’s new IVXX venture “filed in my brand expansion… this press release is probably in response to my cease and desist… We are about to go into a trademark battle I see.”

In May, Barnhill was interviewed by the Denver Post’s marijuana news outlet, The Cannabist. In the article she talks about her upcoming IVXX lifestyle magazine, an IVXX cannabis strain, and IVXX branded accessories, like an iPhone case.  Between her appearances at Denver, San Francisco, and San Bernardino High Times Cannabis Cups, her high-profile interviews with marijuana celebrities like Snoop Dogg and Wiz Khalifa, and her appearances in The Culture High (the best-received marijuana documentary of the year) — all while wearing her glittering IVXX cap — it is difficult to believe any insider in the cannabis community wasn’t aware of Barnhill’s IVXX brand.  However, in July, dispensary owner Ibrahim had purchased and updated the web domain IVXX.com.

However much some people in the financial and marijuana communities have their doubts about Terra Tech, it seems the company is poised to move forward. The financial site MainStreet.com cites the president of the Cannabis and Hemp Association (CHA), a trade association headquartered in New York, as predicting that “they are positioning themselves for a merger or acquisition by a major institutional investor and possibly by a player in alcohol or tobacco industries.”

Robert Hunt, a consulting attorney in cannabis affairs, believes that “[Nevada] holds the management team of Terra Tech in very high regard and believes they will be able to act as positive corporate citizens in a closely scrutinized and highly regulated market.”