Do You Know What You Are Buying When You Make That Marijuana Industry Stock Investment?
Anyone who has done some serious research on purchasing stocks from a marijuana company realizes that a majority of what is out there is bad news. Most of what I have seen out there is a straight scam. The companies will tout 'their experts' and 'mult-state agreements' and a bunch of other impressive sounding claims, but at the end of the day they are just selling stocks that are only worth their weight in toilet paper. The rest of the companies offering stocks I have seen are on the right path, and eventually might be worth something, but for now the are in my 'to be determined' category.
I will be the first to admit, I don't know a lot about the stock market. I don't consider myself to be a savvy investor by any stretch, and readers of this article should know that I don't actually own any stock in anything. However, I know a ton about the marijuana industry, and many of these companies I have seen their operations many times with my own two eyes. I can call BS a mile away in the marijuana industry, and while I might not know a lot about stock trading, I can't easily tell if a company actually has a good product, or a bad product, or in many cases, no product at all.
Marijuana industry profiteers and scammers know that there are a lot of people looking to get into the marijuana boom, and that these same people rarely if ever know anything about marijuana. So they approach the would-be investor, stating that they are about to drop a new product into the marijuana industry, and once it hits the company's stocks are going to climb into the stratosphere. The would-be investor thinks it's a good investment, and only after they read articles like this do they realize they just got took.
What these would-be investors don't realize is that things that work in the traditional business world don't always work in an industry that is quasi-legal, is largely undefined, and was birthed out of a counterculture movement that largely despises all things corporate. For instance you can do a focus group in New York, assuming that if the focus group likes the product that it will do well in the marijuana market. Then you release the product into large marijuana consumer markets in California, Colorado, etc, and realize that true marijuana consumers don't like your product. While the investors are scratching their heads marijuana consumers are like 'duh, there is hardly any real marijuana in New York, why did you base your research there?' These are things that I have been pointing out on this blog for years, and it looks like larger media outlets are finally getting up to speed.
From the L.A. Times:
"The Financial Industry Regulatory Authority, or Finra, issued an investor alert Tuesday cautioning investors that some marijuana stock pitches bear the hallmarks of classic Wall Street "pump and dump" schemes.
The investment pitches can come via email, Twitter, webinars or fax, the alert said. In such scams, promoters of thinly traded, low-price shares (or penny stocks) fuel investor demand by hyping the stocks' growth potential. Then they dump the stock, saddling investors with worthless shares."
From the Huffington Post:
"The majority of marijuana-related companies are so-called penny stocks that trade on the over-the counter-markets, which do not have the liquidity and reporting requirements of major exchanges such as the New York Stock Exchange and Nasdaq."
From Business Insider:
"...the former head of another marijuana-related company was recently indicted for his role in a mortgage-based Ponzi scheme, the watchdog said."
Be careful when you invest in the marijuana industry, stocks or otherwise. Do your homework, and follow up on your research five times more than you think that you should have. Be leery of everything, as there are sharks everywhere waiting to leave you high and dry. Feel free to e-mail me if you have any specific questions and I'll do my best to help.