Rapidly growing cannabis companies have seen their shareholder base change dramatically with the addition of more institutional ownership and need to prepare for their annual general meetings (AGMs), says Toronto-based corporate advisory firm Kingsdale Advisors.
Kingsdale on Wednesday released its 2019 AGM Checklist for companies, designed to ensure companies and corporate directors are prepared for the upcoming proxy season.
“A successful annual meeting is no longer defined by resolutions simply passing. It’s defined by a robust turnout of voters with strong support in a way that signals the company has a broad and definitive mandate from its owners. Even if a resolution passes with low support it can result in embarrassment for directors and reputational damage with shareholders,” says Wes Hall, founder and executive chairman of Kingsdale.
“A strong turnout coupled with strong support is a sign of good governance and can prevent a lot of problems. When we are working for an activist the first thing we do is look at the turnout and identify governance holes,” he adds.
In particular, Kingsdale highlights the need for fledgling cannabis firms to be ready to face the demands of institutional investors, which are increasingly buying into these firms. The number of institutional shareholders for six of the largest cannabis companies has increased by an average of 549% over the past year, Kingsdale says in a news release..
“We expect a lot of rapidly growing cannabis companies may face a rude awakening at their 2019 AGMs when they encounter a shareholder base that has shifted and brings with it more stringent voting policies and a method of evaluation that transcends simple share price performance,” says Amy Freedman, CEO of Kingsdale, in a statement.
“While cannabis companies are focused on the opening of the recreational market, there is a more important choice for them today: Either get prepared and spend the time needed to properly institute best-in-class governance practices, or run the risk of being surprised when you open the ballot box and are left exposed,” she says.