Some might think running a $400m market cap uranium play with continual ‘off-scale
’ assay results would be enough to keep a CEO busy, but Dev Randhawa isn’t one to sit still for too long.
“I was making all this money in buying medical marijuana stock and thought to myself, there’s something here,” Randhawa told me during an interview late Wednesday. “I looked into it and, frankly, saw a lot of unprofessionalism in the sector, a lot of bad ideas. So we decided to give it a hard look and see if maybe there’s potential to do it right.”
Randhawa’s side project, Papuan Precious Metals (TSX:V.PAU
, Stock Forum
) was duly selected as the listing of choice and he began a quest to do for V.PAU shareholders what he’s done for Fission Uranium (TSX:V.FCU
, Stock Forum
) holders – build an empire, build value, and build a brand.
His plan for the weed dispensary world? Starbucks it up.
But before that could happen, he had a problem to fix: The TSX trade halted his stock
at the top of a 900% three-month upward run, demanding ‘change of business’ documentation after V.PAU, a mining company, released news that it had an LOI signed to purchase a medical marijuana dispensary in Colorado
“You know, the TSX, if your stock goes up, they’ll jump in and make sure it doesn’t go up any further,” Randhawa says. “If it goes down, they don’t care. That’s why they’re losing so much business to the CSE; that’s their model. You’re trying to do right by the shareholders, trying to get the share price up, trying to do business, and they’re all over you.”
Recent mining-to-medical marijuana convert-in-progress Chlormet Technologies (TSX:V.CMT
, Stock Forum
) faced the same issues earlier this month when, after sending out a news release detailing an LOI they signed in the weed space
, they were trade-halted by the exchange
and have remain halted since.
That stock has sat at the top of a V.PAU-like three-month 830% increase since it was halted on April 4, with investor money tied up and the company unable to move forward with financing and more news.
Randhawa hasn’t met the same fate as Chlormet; he set his legal dogs on the regulators and managed to argue his way out of the halt
within 48 hours.
“They’ve got some weird ideas, the TSX people, about how to do business,” he says. “Look, I’ve done two spin offs of Fission in the worst shrinking market of the last few years, hopefully that has something to do with [the resumption] - we’ve always done what we said. And we’ve made it clear in the news release, PAU is still a mining company.”
“The biggest concern for the TSX is you do a deal, you blow off a bunch of paper, the deal collapses and no deal happens. We made it clear that we don’t plan to switch businesses – I’ve spent $9 million in Papua New Guinea, I’m not about to walk away from that, believe me. I have no interest in getting rid of mining, but there’s a big opportunity here we’d be stupid not to explore.”
Several medical marijuana converts have opted to do business on the Canadian Stock Exchange (CSE) rather than the TSX, with Supreme Pharmaceuticals recently making the jump.
The shift is a double-edged sword in that it lowers exposure to investors and institutions - a poll on Stockhouse.com today suggests 40% of investors don’t invest in the CSE, and 43% have reservations about doing so - but it also lowers the regulatory bar on things like a Change of Business process. The CSE isn’t exactly infamous for getting in the way of a company doing business in untraditional ways
For Randhawa, his recent dealings with the TSX are giving him reason to consider a switch to the lesser exchange. It’s something he’s exploring.
“The biggest problem we’ve always had on the CSE was there were no bids and what bids there were, were by appointment. That’s changing as we speak. It’s more and more a true alternative to what the other exchanges are doing.”
Randhawa takes pains to point out that he understands the need for an exchange to be vigilant, but doesn’t see why they focus on companies actively making deals rather than companies that lie dormant for months without talking to their shareholders, or sit on half penny stock valuations for long periods without exploring options.
“To me, it’s a good concern to be looking for bad companies, because every time a bad guy does something, good guys have to spend a lot more to do it right. Since Bre-X, now we have a 43-101 which you could argue isn’t worth much. I’m okay with that, but the TSX does need to be more flexible.”
He adds, “The TSX has been very good to me, but I also have a fantastic lawyer and I do what I say. My reputation is far more important to me than it is to most people. If investors lose confidence in that reputation, I can’t make deals, so if I say my company is still a mining company, it’s a mining company.”
Randhawa’s beef with the exchange isn’t that they’re watching; it’s that he’s trying to be open with shareholders about what directions his company is exploring, but he and others are putting themselves in a perilous situation in doing so.
Full disclosure is something every investor hopes for, but an IIROC halt ties their money up, and ties the company up, for an unknown period. That’s a big deal when companies in this new sector are rapidly fighting for market share, private placement money, and investor confidence.
In the US, when Growlife (OBB:PHOT
, Stock Forum
) was halted by the SEC while it checked the validity of some third party deals, confidence in the entire US sector dropped hard
for several days.
When Papuan was halted, the same thing happened in Canada
, which raises an important question: does an investigation by regulators to look for a potentially bad deal that might create losses for investors sometimes have the unintended effect of creating losses for investors across the board?
Randhawa is just thankful he was able to make his case, and quickly.
“I think, ultimately, they were fair with us because we made it clear in our news release that this is a full disclosure case. That’s the way it should be done, everyone should know the risk, the details should be clear.”
Randhawa doesn’t see a lot of that in the medical marijuana sector right now.
“The big frustration, the problem we’ve had is, some of these deals, people in the business don’t realise you have to apply for a [Health Canada MMPR] license, but you also have to get zoning. I think open full disclosure is great and medical marijuana has a lot of bullshit out there. There are companies in the states with market caps of $200m and they want to sell vending machines. No sales, no prospects, and they want to have weed vending machines,” he says.
“We’ve done some research on some of these medical deals, and you’ve got companies promoting a license they don’t have yet, and if they do get it, the city has to allow it. I mean, I don’t know if a city like Abbotsford [a city in B.C. with a heavy religious base and zero tolerance for drug use] will ever allow a grow op, whether you have a license or not.”
Okay okay, I know what a lot of you are thinking: ‘Starbucks it up’? Alright, let’s get to the Papuan Precious business model – assuming they go beyond an LOI and, at some point in the future, fully engage in the weed business [Regulators happy? Let’s continue].
“We want to buy dispensaries and do a roll out play,” says Randhawa. “There are 800 dispensaries in the US. Imagine if you got ten percent of them.”
Randhawa also wants to turn those largely mom’n’pop dispensaries into a streamlined vertical integration outfit.
“A lot of guys in this business are underfunded,” he says. They’re unprofessional, they don’t have the big picture, so that’s why I’m saying we have a threefold plan – we’ve got to own dispensaries, own our own lines of products to be sold in the dispensaries, and lock down every stage you can.”
This thinking appears in line with earlier interviews Randhawa has had with Stockhouse, when discussing his mining projects. He said in March last year
, "You need to have an eye for a good deal, that much is obvious. Pick up assets that are undervalued or that have been poorly managed and develop them properly."
The plan includes a focus on branding, something the heavily splintered US market hasn’t yet come to terms with.
“With Fission, we never start brand new uranium companies, we take the same one, split it, split it, split it. Fission Energy made Fission Uranium which made Fission 3.0. You want to be your own brand. That brand is important. People know what they get with Fission.”
Papuan Precious has just announced a small private placement
. Randhawa expects it to go quickly and says he could raise five times the $500k expected, but doesn’t want to dilute the share base and suspects he’ll get a much better price per share going forward.
And as for the product itself, he’s a believer in the potential of medical marijuana to transcend its Reefer Madness past.
“I have a friend with back problems, a somewhat famous hockey player, he tells me that, ‘all along, I smoked marijuana all through my career. There were no side effects, it was a better pain killer than Percoset, and now they say maybe it can reduce cancer.’ That sounds like an opportunity to me.”
FULL DISCLOSURE: Fission Uranium is a Stockhouse Publishing client. Also, the author of this piece owns a small holding of Chlormet shares. He would have sold them weeks ago, long before writing this article, but… you know… trade halted.