Raw rolling-papers founder Josh Kesselman's quest: An IPO that doesn't kill the company's vibe

By Steve Gelsi

Entrepreneur and innovator wants to sell shares of Raw parent company HBI International to an avid customer base without diluting the brand

Josh Kesselman's inventions range from a new flame lighter with a screen to stave off wind to a line of ultrathin rolling papers.

Now the founder of the Phoenix-based rolling-paper maker Raw wants to find a way to take the company public while keeping its culture intact.

"If I could shift the idea of capitalism by a millimeter by doing something different, that would be great," Kesselman said. "We don't want to be just another cog in the wheel."

Having built Raw from its startup days in the 1990s, Kesselman today employs roughly 100 people in the U.S. and generates annual domestic revenue of about $120 million.

That revenue figure is about a quarter of the $405.4 million in revenue reported by Raw rival and Zig-Zag rolling paper maker Turning Point Brands Inc. (TPB).

While Raw may not have the heft of Turning Point Brands, it's a relatively big name in pop culture, with support from celebrities such as Lil Wayne and Miley Cyrus. Rapper Wiz Khalifa featured the brand in his song "Raw" a track on the 2014 album "Blacc Hollywood."

Raw products are heavily used in pre-rolled joints sold at legal adult-use cannabis dispensaries around the U.S.

Kesselman figures he has about 10 years before he'd like to retire and move to Spain. Between now and then, he's trying to come up with a way to sell shares of Raw to the company's customer base as a partial exit from family ownership of the company.

He remains reluctant to sell Raw and its parent company, HBI International, to a private-equity firm or even a strategic buyer because he fears "they'll milk it like a cow and run it into the ground."

He likes to joke that he tends to avoid talking to investment bankers about merger deals or staging a traditional initial public offering "because they're too smart and they scare me." A fear, according to Kesselman: being made to change the path and mindset of the company.

So he's studying other examples of alternative IPOs. He's checked out, for example, the Green Bay Packers, the legendary National Football League team has been a publicly owned nonprofit for a century.

From the archives (December 2011): The sad tale of a Green Bay Packers stockholder

Spotify Technology (SPOT), which used a direct public listing of its stock rather than an underwritten IPO, has also caught his interest as exemplifying a method of diversifying and solidifying ownership, he said.

He admires the ice-cream maker Ben & Jerry's because the founders have remained active and are seemingly able to continue their innovative practices despite corporate ownership after the sale of the company to consumer-products multinational Unilever PLC (UK:ULVR) (UL).

He also looks up to Dr. Bronner's, which has grown into a national natural-soap brand but remains a family business.

Kesselman said he could envisage Raw holding annual shareholder gatherings that would resemble Berkshire Hathaway's (BRK.A) (BRK.B) yearly meet-ups in Nebraska, but for fellow enjoyers of cannabis and other smoking products. "I want it to be a rolling-community IPO," he said.

Philanthropy is another company value Kesselman wants to preserve at Raw, with HBI International having recently passed the $3 million donation mark with contributions to a variety of nonprofits, including the Last Prisoner Project, NORML, the Weldon Project, and causes focused on clean water and animal rescue.

Kesselman continues to work on brand extensions and innovations including a music festival in the works with Wiz Khalifa on the bill for 2025; building a new "secret" facility in Spain; and moving the company headquarters into a former bank building, replete with vaults.

He has, he said, gotten a "strong, positive response" to Ethereal, a new line of thinner rolling papers, with plans to craft a "king-size" wide version of the papers.

Other companies wouldn't bother launching a product for such a niche market, but Kesselman said it's important for Raw to serve its superloyal fan base.

"I understand smokers - I can make them happy, and they make me happy," Kesselman said. "I don't need that big check. I don't even know how to play golf. "

Despite his worries over investment bankers and about Wall Street's emphasis on short-term profits, taking Raw public remains a dream.

"I want Raw to continue its overall priority of empathetically connecting with consumers and giving them what they want," Kesselman said. "Even if doing that may impact profits in the short term, in the long term it helps distinguish the brand and [allow it to] more deeply connect and uplift people who smoke Raw papers."

Read on: Raw rolling papers founder looks to further elevate cannabis name celebrated in Wiz Khalifa song

-Steve Gelsi

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07-09-24 0630ET

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