What difference does $30 million make?
In the weeks after Arkansas cannabis financial firm Abaca was acquired for that amount by Colorado’s SHF Holdings Inc. late last year, Abaca co-founder Dan Roda says in some ways, very little.
“At our core, we’re still doing the same thing,” Roda told Arkansas Business last week, “expanding access to banking services for cannabis businesses and mitigating risk for the financial institutions that serve them.”
Roda said two months have passed since SHF, doing business as Safe Harbor Financial, closed on its acquisition of Abaca. “We are actively engaged in the post-merger integration process,” he said, “combining departments, operating procedures and cultures across our Colorado and Arkansas offices and remote teams. While there may be some differences in the way the two organizations have done things in the past, we have one unified mission.
“Together, we are now supporting the cannabis industry and financial institutions nationwide.”
The merger and its $30 million price tag made headlines in late October.
Roda, a cannabis regulations lawyer with commercial lending expertise, went from being Abaca’s CEO to being Safe Harbor’s executive vice president and chief operating officer. Abaca co-founder and President Brian Bauer, a fintech expert and venture finance veteran, became the company’s chief revenue officer.
Other Abaca leaders, including co-founders Greg Ellis and John Foley and payments industry expert Doug Elkins, also took spots on Safe Harbor’s executive roster.
NLR Offices Kept
“The mission hasn’t changed, just expanded,” Roda said. “Our clients have access to Safe Harbor’s concierge financial services team, and our partner banks now have the support of Safe Harbor’s deep compliance expertise and national loan participation network.”
Still, some changes were inevitable, he added.
“Some of the processes and even the tools we use to achieve these objectives have changed. There are several ongoing projects, everything from merging our databases to migrating onto one email client,” Roda said.
He conceded that challenges arise in managing a distributed team. “This is something we first faced at the beginning of the pandemic, which was much earlier in Abaca’s journey.” But with the Slack instant messaging program and videoconferencing, not to mention “a little bit of intentionality,” Abaca’s team stayed in communication.
Abaca’s offices in Argenta, across Main Street from North Little Rock City Hall, will remain a part of Safe Harbor’s operations. Roda, who already had an office in Colorado, will be an even more frequent flier.
“Safe Harbor is based in the Denver area, and we are currently in the process of finalizing a move into a new corporate headquarters in a very nice Class A office park in Golden.”
Roda said he’s “one of several members of the team who will likely be making the trip between Little Rock and Denver frequently this year, so I’m grateful we have nonstop service on multiple airlines.”
The North Little Rock office will still be used by several departments, including technical resources and most of Safe Harbor’s developers. “I’m glad to continue our presence in Argenta,” he said. “I’ve really enjoyed having our office there these last several years, and the neighborhood seems to get better with each year that goes by.”
The acquisition deal gave Safe Harbor access to more than 300 Abaca accounts, as well as relationships the Arkansas company had developed with financial institutions. It also expanded company operations to more than 40 states and territories.
The deal gave shareholders in Abaca $30 million in cash and stock. That came in the form of $3 million in cash and about $8.4 million in Safe Harbor common stock at closing Nov. 16, and another $3 million in cash and $12.6 million in stock due this November. A final $3 million in cash is due on the deal’s second anniversary.
Abaca has processed more than $3.4 billion in gross transactions since its founding in 2017, and was built on modern cloud-hosting technology. It works with FDIC-insured banks to allow traditional banking services in the highly regulated industry for businesses ranging from single dispensaries to multistate and national operators.
“Abaca’s digital platform enables small, medium and enterprise cannabis businesses to consolidate financial operations nationwide, including commercial checking,” Safe Harbor’s announcement of the closing said. Services also include fund transfers, wire payments, cash logistics, treasury management and payroll services.
In a news release, Safe Harbor founder and CEO Sundie Seefried called the Abaca acquisition “a critical first step in Safe Harbor’s ongoing strategy to identify companies that can expand our market share and deposit base for our financial institution clients, increase lending capacity, and complement our existing technology platform to be first in class in cannabis financial technology.”
Gill Ragon Owen in Little Rock was legal adviser to Abaca.
A Growing Alliance
In Safe Harbor’s third-quarter earnings report, Seefried described 2022 as a “transformative year” in which the company achieved its public listing on Nasdaq and positioned itself to be a “leading provider of compliant financing and banking solutions to the regulated U.S. cannabis industry.”
The filing reported a 38.6% increase in revenue to $2.38 million for the three months that ended Sept. 30, compared to $1.72 million for the third quarter of 2021. Recent interest rate increases drove the surge, the company said. “Adjusted EBITDA was $1.28 million” for the reporting period, up from $947,000 in last year’s third quarter.
“Looking back, I’m proud that we were able to support the first regulated cannabis market in the Deep South, ensuring safe access to banking from day one,” Roda told Arkansas Business. “I’m also proud to have been part of a central Arkansas fintech success story, and I look forward to continuing that story as part of Safe Harbor Financial.”
One key to success was the commitment of “multiple gubernatorial and mayoral administrations to lay the groundwork for a tech economy in Arkansas,” Roda said. “I like to think that the Abaca story helps demonstrate that these community investments are worthwhile, and why they should continue.”
A Double-Duty Name
Elizabeth Michael, the Little Rock public relations and advertising pro also known for her dog-centric Bark Bar in Little Rock, was marveling last week at the cuteness of her 4-week-old baby — the human kind — when he did one of those baby things.
“He pooped on me this morning, so that wasn’t so cute,” she said. “But I think that’s a typical baby event, right?”
Michael, a co-founder of the Bud Agency in Little Rock with Martin Thoma, representing cannabis-based businesses, had no trouble naming the infant. The boy’s dad is Dan Roda, the lawyer and CEO of Abaca of North Little Rock, the cannabis company financial provider which was acquired last year and is profiled in this issue.
The little one is named Paul Michael Roda, echoing both grandfathers. One, Elizabeth’s father, is well-known Lake Village collector and home products merchant Paul Michael, namesake of the Paul Michael Co.
His other grandfather is the late Dr. Paul Roda, a Pennsylvania oncologist and hematologist.
“Dan’s dad was Paul Roda,” Elizabeth Michael said. “My dad, obviously, is Paul Michael. So we put both of their names in there. And, you know, Dan and I have different last names. So Paul Michael Roda is sort of a twofer.”
So, Whispers asked if the two high-achieving parents had a college picked out yet for young Paul. “It’s funny, because we were just talking and saying I wonder where he’s going to go to college,” Elizabeth said. “We’ll have to see. He might be a trade school kind of guy.”
Elizabeth Michael went to Villanova, Dan Roda to Tulane. Then for graduate school, Roda went to Villanova, where the couple met. Roda got his Master of Law degree at the University of Alabama, “so we have a lot of colleges in the repertoire,” she said. Michael grew up in Lake Village, and Roda hails from the Pocono Mountains of Pennsylvania.