Growlife Inc. (OTCBB:PHOT) Jumps On Banking News
Growlife Inc. (OTCBB:PHOT) had a good run before the long weekend, making a 8.57% jump on Friday all on the news of the lifting of the federal ban on banking services for marijuana businesses.
Allowing marijuana companies access to banking was certainly a logical step in legitimizing the industry. Concerns for the security of marijuana shops and retailers were voiced on more than one occasion, by vendors, investors and police officers alike. At first glance, removing the banking prohibition seems to provide a perfect solution to this problem, along with many others, like crediting, on-line and check payments and so on. As it turns out, that might not be the case.
As CNBC reported on Friday, the “new pot banking rules” may have allowed banks to do business with legitimate marijuana dealers, but most banks don’t really show much enthusiasm about dealing with pot companies. The main reason for this is the fact that in order to deal with marijuana vendors or pot-related companies, banks will have to dedicate a lot of resources to keeping a very close eye on such clients.
Despite the promise from government officials that law-enforcement agencies will not interfere with legitimate business, it is uncertain how many credit institutions will agree to accept the inherent risks marijuana retailers represent. Federal policy on sensitive topics is known to change at the blink of an eye, thus most financial institutions are unlikely to do business before a law regarding the subject passes congress. The marijuana sector is already a $2.34 billion industry and is expected to grow to five times that amount in five years, but is it worth the effort and the risks?
In spite of these possible difficulties, the news helped the whole sector surge on Friday. Companies like Tranzbyte Corp (OTCMKTS:ERBB) and Dewmar International BMC Inc. (OTCMKTS:DEWM) managed a significant move up in the same session. The main reason PHOT lagged behind them in the chart climb is the 8-K the company filed on the same day.
Said report dealt with the increase of PHOT‘s authorized shares of common stock from one billion to three times that amount. Although the company is obligated to issue a large amount of restricted shares of its common stock and use them to pay FITX for their joint venture in Canada, this change appears unnecessary.
A simple number crunch reveals that PHOT currently has 738 million outstanding shares, so the company can issue the required 235 million and another 27 million besides that before it reaches its authorized number of shares. The company hasn’t really given a reason for the rather dramatic increase, but the change has raised more than a few questions.
