Penny Stocks and Cannabis Investing
The penny stock market is rife with imaginative ways to lose money. But that’s only part of its allure. There are also diamonds in the rough that can make bundles of money for investors willing to take a risk. The upside is that a $500 investment could turn into big pile of cash. The downside (and this is more often the case) is that if it tanks, you’re only out a few hundred bucks. This risk/reward scenario has gotten a lot of people interested in the emerging cannabis business, and for some pretty good reasons.
The Upside of Cannabis Investment
Marijuana, just one of the cannabis products, is poised to be the largest cash crop in the U.S. Estimates of its market growth reach as high as 700% over the next year or two. That’s due to the increasing number of states legalizing it for medical and recreational use. Estimates of its market size by the end of the decade range from 24 to 142 billion dollars. By comparison, the global coffee market is about $80 billion annually, and if the higher estimates are reached, marijuana will outstrip corn, wheat, and cotton as a cash crop. Another cannabis-related crop, industrial hemp, shows similar potential as it becomes more widely used for commercial purposes, including the extraction of cannabidiols for medical and therapeutic uses.
The Downside of Cannabis Investing
Perhaps the biggest risk can be summarized in one word: politics. The federal government has taken a relatively hands-off stance on local legalization of marijuana, and has been largely permissive regarding cannabis byproducts such as CBD. But it remains a Schedule I drug under federal law, and that makes it subject to policy shifts in Washington. On the other hand, legislation has been introduced to reclassify marijuana as a Schedule III drug, putting it in the same category as prescription drugs and greatly expanding its availability for research.
While President Trump has been ambivalent on the topic of legalization, his Attorney General, Jeff Sessions, has been outspoken in opposition. But 28 states have legalized marijuana in one form or another, and politicians from those states, along with others, have become more active in promoting decriminalization and more liberal laws regarding its use.
What You Need to Know Before Taking the Plunge
If you’re tempted to dive in, you won’t be alone. PayPal co-founder Peter Thiel, former Facebook president Sean Parker, and billionaire George Soros have all invested in the legal marijuana market. Rapper Snoop Dogg has bet big, investing $25 million. And these folks are not used to losing money. But they’re the whales, and penny stock buyers are the minnows. So where’s a safe place to swim?
If you want to invest directly in marijuana stocks, forget it, at least in the U.S., at least for now. With marijuana classified as Schedule I, the Financial Industry Regulatory Authority (FINRA) isn’t going to allow a cannabis company to go onto any stock exchange. That’s caused companies like IAnthus Capital Holdings, CannaRoyalty Corp., and Canadian Bioceutical Corp. to incorporate in Canada, which allows marijuana-based businesses to list publicly on the Canadian Securities Exchange, and raise capital for U.S. operations. If marijuana is reclassified, that will open lots of doors, though, and you can expect Big Business, both agricultural and pharmaceutical, to rush in.
For now, the play, with all its attendant risks, is in small companies on the medical side. Use your due diligence and do your own research, but you can get your feet wet with several OTC and NASDAQ stocks.
At the minimum, the market for penny cannabis stocks is extremely volatile. It’s also full of bad actors who misrepresent their true businesses by adding the term cannabis to their names and then hype their shares Bernie Madoff-style. Assess your personal risk level and make informed decisions. Here are some places you might want to start, but ultimately, you’re responsible for your decisions, good and bad.
Should You Invest in Marijuana Stocks? (NASDAQ.com)
7 Marijuana Penny Stocks to Watch in 2017 (Penny Stock Whiz Kid)
iPuff Vape™ LLC is not in the business of recommending investments of this or any other kind. We sell vaporizing pens and legal cannabis-related products. This article is for information only and is not intended as investment advice. You’re on your own. Period.
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