The marijuana industry is maturing before our eyes, but it's likely going to be a lengthy and potentially bumpy process. After all, despite cannabis generating tens of billions of dollars in the black market, regulated legal weed is a completely new concept that governments and businesses are still trying to fine tune.

Cannabis stocks focus on being seen by Wall Street

One of the many ways that cannabis stocks are "growing up," so to speak, is through initial public offerings (IPOs) and by uplisting to major U.S. exchanges. Today, more than a dozen marijuana stocks are now listed on either the New York Stock Exchange (NYSE) or Nasdaq (NASDAQ:NDAQ).

A television studio inside the Nasdaq exchange, with the electronic big board in the background.

Image source: Nasdaq.

Listing on either of these exchanges has obvious advantages -- namely, it allows marijuana stocks to be listed side-by-side with time-tested businesses, demonstrating to Wall Street and skeptical investors that the legal cannabis movement is here to stay. For pot companies, being listed on these major exchanges should also increase daily trading volume, reduce volatility, and may encourage Wall Street coverage and/or investment.

So you might be wondering why every pot stock trading on the over-the-counter exchange doesn't uplist to the NYSE or Nasdaq, given these benefits? The answer has to do with U.S. federal regulations concerning marijuana, which is still a Schedule I (i.e., illicit) drug. No company that directly deals in the U.S. cannabis industry can list its shares on either exchange, which eliminates U.S. dispensary operators and Canadian growers aiming to operate U.S. grow farms or dispensaries.

Furthermore, the NYSE and Nasdaq have a laundry list of qualifications that prospective uplisting companies need to meet before they're given the green light to list their shares. Some of these metrics are trading based, such as average daily volume and minimum share price, while others are focused on a company's finances, such as revenue.

The point is that, because of marijuana's scheduling and the NYSE's and Nasdaq's listing requirements, uplisting to these major exchanges is more an exception than the expectation for the time being.

Flowr chooses not to bud on the Nasdaq

While most pot stocks that have filed paperwork to uplist to either exchange have had their requests approved, one cannabis stock that had been granted approval to list its shares on the Nasdaq decided in July to pass on the opportunity. 

An up-close view of a flowering cannabis plant that's growing in an indoor farm.

Image source: Getty Images.

In May, niche marijuana grower Flowr Corp. (OTC:FLWP.F) announced that the Nasdaq had approved its application to list its shares on the Nasdaq Capital Market. Flowr, which operates out of British Columbia, is focused on developing the Kelowna campus to produce around 50,000 kilos of premium and ultra-premium weed annually. Kelowna will also feature 150,000 kilos of outdoor-grown marijuana and 42 separate greenhouses, each spanning 4,500 square feet, adjacent to its premium-grow facility. 

Given that so many Canadian growers are focused on discount or average-quality cannabis, Flowr anticipates significant demand and pricing power for its premium and ultra-premium product. In fact, it's one of the only growers to see an increase in per-gram selling price for dried flower in recent months.

This niche focus is a big reason why Flowr's share price had rallied by more than 100% between November 2018 and its uplisting announcement in May. But there was a problem.

In July, Flowr announced its intention to acquire a 100% interest in Holigen (it already owned a 19.8% interest) in a cash-and-stock deal. Holigen's Aljustrel grow farm in Portugal spans 7 million square feet and could net Flowr 500,000 kilos of peak production per year. While not of the same caliber as Flowr's premium Kelowna grow, this Portugal farm should be perfect for extract and derivative production in the European market. 

The issue is that Flowr needed capital to make this deal happen, as well as continue its build-out at and adjacent to Kelowna. This meant a bought-deal offering that sunk its common stock like a stone.

In order to initially list on the Nasdaq, a company needs to maintain a share price of $4. As of this past Tuesday, Flowr closed at a hair over $3. Struggling to meet the listing requirements but without admitting so, Flowr pulled the plug on its Nasdaq uplisting last month.

A person holding a magnifying glass above a potted cannabis plant.

Image source: Getty Images.

Flowr isn't alone

It is, admittedly, a bit of a head-scratcher as to why Flowr wouldn't continue to push for uplisting to the Nasdaq. Exceptions have been made on listing share price before, and both daily trading volume and Wall Street coverage on the company would almost certainly improve if it made the move.

However, Flowr isn't alone in struggling to meet the listing requirements for the NYSE or Nasdaq.

In October, Aleafia Health (OTC:ALEA.F) finalized and submitted its application to move to the Nasdaq from the over-the-counter exchange. This application came at a time when cannabis stocks could do no wrong, and Aleafia's share price had more than quintupled in a matter of months to about $2.40 a share. 

However, Aleafia Health has had no luck in getting approved to list its stock on the tech-heavy Nasdaq. After acquiring Emblem earlier this year in an all-stock deal, Aleafia's share price has continued to be hammered by dilution. Shares of the company have spent much of the past two months under $1, which not only is too small to gain approval to uplist but is lower than the minimum requirement to maintain listing on the Nasdaq.

For cannabis stocks like Aleafia Health, reverse splits might be their best and only chance to surpass the minimum share price requirements needed to uplist to a major exchange. But given the negative connotations often associated with reverse splits, this is an avenue many pot stocks may shy away from.

For now, uplisting to either the NYSE or Nasdaq remains reserved for only a small number of pot stocks.