People will soon be able to purchase marijuana legally in Colorado and Washington State. Who will get high, financially speaking, from this emerging market? One aspiring company is GrowLife (PHOT), a publicly traded business in Woodland Hills, Calif., with cheeky ticker symbol PHOT. It doesn’t actually sell pot; it caters to marijuana growers, dealing them hydroponic gardening equipment. More intriguingly, GrowLife wants to be their lender.
I talked to Rob Hunt, executive vice president of GrowLife (and his public-relations guy, Kurt Divich), about the company’s big plans and the last time he got stoned. The following transcript has been edited and condensed.
What exactly are you guys selling at GrowLife?
Rob Hunt: We sell hydroponics and organic equipment to be used in [marijuana] cultivation facilities.
How is the business going?
It’s definitely an accelerating growth stage right now.
And you guys have a bunch of stores?
Yeah, we’ve got seven bricks-and-mortar stores right now between the states of Maine, New Hampshire, Massachusetts, Colorado, and California.
Do you sell any R. Crumb underground comics ?
Underground comics? No, we don’t.
Any bongs or anything like that?
No, no, no. We stayed away from the paraphernalia side.
Kurt Divich: GrowLife is a good-size business looking to be a very large business. The company just got a $40 million capital infusion to help small and midsize growers go to the next level.
Why is this a stock—PHOT—one that our readers should buy?
Divich: If you’re interested in the cannabis market, we are the safe play. We’re revenue-diversified. We’re regulatory-compliant, because we don’t actually touch the cannabis. So even in areas where legal uncertainties remain, GrowLife still can operate.
Hunt: More important, as groups get accepted for licensure, they don’t necessarily have the ability to come up with the capital for the buildout of the [marijuana-growing] facility, the purchasing of the building, the equipment supplies that are needed. A decent-size facility in a well-regulated state can be upwards of $2 million to $3 million, so we come in there with absolutely everything. Not only will we loan the money to groups that are looking to build these facilities out and take a nice percentage on the actual sale. It’s not just that we’re a retail play; we’re also in many ways a financial play. Finance is not available to cannabis companies, not from traditional sources.
Why is that?
Hunt: As long as cannabis stays a Schedule I drug, there [are] issues with the Controlled Substances Act, and as a result, banks, being FDIC-insured, have to subscribe to what’s across all 50 states. Now, having said that, the [U.S. Department of Justice] did provide guidance on Aug. 29 saying so long as you stay within the confines of the lines provided to you by your legislature in your individual state, we will take a hands-off approach. As long as you’re not doing anything that violates one of their eight conditions, being, you know, no diversion to children, no crossing state lines, no working with organized crime.
Tell me a little bit about yourself and your background.
Hunt: Sure. I am an attorney in Colorado. I started my first hydroponics store back in 2009. I walked into a few of these stores and thought I could do it better. When the rules changed in Colorado that allowed for cannabis growing, I saw the sheer volume of capital that was flooding into this and said, “OK, you know, I know a lot about gardening, and I definitely think I know a fair amount about business, and I certainly understand the regulatory scheme.”
What happens to you guys if Philip Morris (PM) gets into this?
Hunt: Right. Well, we hope that our footprint at that point is large enough that we’ll be seen as something very, very valuable to them. We also think that we provide things that they don’t, No. 1 being, you know, expertise in the industry. I’m not foolish enough to think that Philip Morris can’t buy those things, or RJR (RAI). But at the same time, we have a tremendous first-mover advantage in this space.
How high were you guys when you came up with your business plan?
Hunt: I haven’t smoked cannabis in years. College. Let me put it this way, not since well before law school.