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There was a lot of discomfort surrounding one of the largest and most highly anticipated events at the Consumer Electronics Show (CES) last week, the Extreme Tech Challenge. The reason for this discomfort stemmed from a cannabis related technology company’s participation in the Extreme Tech Challenge.
Although many technology companies say they are the most progressive in the country; when it comes to cannabis, they are not. Such companies actually operate under the most regressive policies when it comes to cannabis.
Negative Bias is Nothing New for Cannabis Related Tech Companies
This negative bias is nothing new for MassRoots Inc. (MSRT) which was one of the top 10 finalists at the Extreme Tech Challenge. In May 2015, MSRT presented at TechCrunch’s Startup Alley competition in New York and received five times more votes than its next closest competitor.
Although MSRT easily won TechCrunch’s Startup Alley competition, the company was told they could not advance to the next round because their technology and user community were “not significant” enough. A TechCrunch editor told MSRT that they would not be given a presentation spot at Startup Battlefield without explaining the basis for their decision.
CEO Isaac Dietrich said TechCrunch dismissed MassRoots because they are a small company not backed by a large investment fund and because they embrace the marijuana consumer culture. CEO Dietrich said that TechCrunch did not like how MassRoots represented the technology industry.
New Competition, Same Negative Bias
Before the Extreme Tech Challenge even started, the negative bias surrounding MSRT’s participation started to grow after Bloomberg published an article titled, “Pot Tech Companies Are Sneaking Into CES.”
MSRT was invited to present at CES and did not “sneak in” as the title suggests. The company was also invited to Necker Island in early February to meet Sir Richard Branson, founder of Virgin Group.
The organizers of the Extreme Tech Challenge were trying to convince Dell to send a judge to the contest and award computers to the winner. Dell, however, decided not to after MSRT was named one of the ten semi-finalists. Dell issued the following statement prior to the competition:
“Our goal with programs like this is to provide computers to influencers who create a positive impact through technology. In this instance, we declined to participate because one of the companies in the contest did not meet our criteria.”
User base and Traffic Continue to Grow
Today, MSRT announced that its web traffic increased significantly on a month-over-month basis. During the December 13, 2015 to January 12, 2016, time period, MSRT’s website had 624,000 page views and 81,000 unique visitors. The company’s blog grew to 181,000 page views and 122,000 unique visitors over the same time period.
The catalyst behind this growth stems from MSRT’s announcement in late November. In the announcement, MSRT said they started indexing public content on Google, introduced the first version of dispensary discovery, and started monetizing the platform through sponsored posts and featured user placement. CEO Isaac Dietrich said he expects these metrics to attract more advertisers and increase the amount spent by current advertisers. He also expects to see revenue growth when localized advertising features come online later this quarter.
MassRoots was founded in 2013 and is considered to be the “Facebook of marijuana.” MSRT has over 725,000 users and only operates in the states where medical marijuana is legal (23 states). Its apps let people discuss their cannabis-related experiences, learn about dispensaries and keep up with state-by-state campaigns to liberalize drug laws.
Weakness Creates Opportunity
Today, MSRT announced that from December 10, 2015 to January 13, 2016, shares of MSRT common stock sold in a private placement at $0.75 per share from June to July 2015 became eligible for resale under Rule 144. The only subsequent round of financing after the $0.75 private placement was a registered offering in November 2015 that was immediately eligible for resale.
Mushroomstocks is favorable on this announcement because MSRT disclosed that a certain number of shares purchased at $0.75 recently became eligible for resale. This disclosure provides clarity into the recent sell-off, as well as a support level (the price of the private placement). MSRT ended the day down 4.6% and shares are trading at $0.80. MSRT is trading in oversold territory and we remain favorable on shares.
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