MassRoots Board Fires CEO Isaac Dietrich
In a stunning coup, MassRoots‘ board of directors has voted to oust the company’s founder and CEO, Isaac Dietrich, and install Vice President Scott Kveton as the new CEO, while the company’s new president, Amanda Ostrowitz, is out of the country.
Dietrich has been losing the support of the board as the company burned through cash, while revenues continued to drop. Dietrich had been making small acquisitions to shift the company from its roots as the “Facebook” of cannabis to a compliance and cannabis tech company. One of the companies he acquired, Odava, brought Kveton into the company this past July as the new Director of Business Development. Then Dietrich agreed to acquire the legal compliance company CannaRegs for $12 million and named its CEO, Ostrowitz, as the President of MassRoots. Supposedly, Kveton was unhappy with the move and believed the price paid for CannaRegs was too high.
Ostrowitz defended the price since her company was debt free and was claimed to be immediately accretive with revenues of $500,000 a year. She had also been offered $10 million for the company through private investors. Just today, MassRoots announced additional deals that CannaRegs had signed with new clients. It was also rumored that Ostrowitz would take over as CEO at some point in the future.
Over the weekend, aware of the impending board vote, Dietrich began reaching out to shareholders to gain their support. According to one large shareholder, who asked not to be named, Dietrich had secured a majority of the shareholder votes to remain in place and remove the board instead. However, there seems to be some disagreement over whether a formal vote took place. A source close to Dietrich said a vote did take place to remove the board, but there is no communication from the company to confirm this, which would take the form of an 8-K filing. The board seemed to beat Dietrich to the punch and fired him before he could fire them.
Dietrich founded the company and has helped raise over $20 million for it. He is well-liked within the cannabis industry but had recently come under suspicion of stock promotion. There were questions surrounding some stock promotions near the time of a company town hall this past summer, but Dietrich denied any knowledge of the promotions. One stock promoter, who asked not to be named, disputed the denial and said he did take money for the promotion. Just last week, MassRoots paid $13,000 to Small Cap Leader and $5,000 to Stock Commander for newsletter promotions. These latest instances came the week before the board meeting.
The stock had been at a low of 30 cents per share and popped to 44 cents per share following the newsletter mentions. After today’s news, the stock has plunged 22% to 33 cents.
The large shareholder, who preferred not to be publicly named, is upset that the board did not follow the shareholder’s wishes and keep Dietrich. It seems the shareholders would now have to oust the board in a formal vote in order to reinstate Dietrich. Ostrowitz is currently traveling in Europe and wasn’t available for comment.