The real action in the public cannabis space is taking place outside the United States right now. So far, the majority of public company activity in the U.S., has been at the very least questionable.
While the world is watching, a publicly traded, liquid cannabis space is forming literally overnight. Global equity investors are taking note. Actually this is the next step in a market maturation process that has been in progress since about 2008, since the Israeli program began to formalize. Medical trial marijuana has been shipped around the world since much longer than that.
In the last 18 months or so, however, major Canadian licensed producers have gotten hip about launching equity plays in strategic markets. That includes most of the largest LPs now actively searching for foreign plays – and all of them with at least tens if not hundreds of millions of dollars in capital at their disposal.
With Israel now launching into the medical export market for bud cannabis as well as pharma products based on cannabinoids, this opens the floodgates for both product and technology from the Start-up Nation. Israelis have already been looking into this space of course. As of last year, there was about $100 million invested by foreign firms into the vertical within Israel. While they have not begun jumping abroad yet, they are clearly looking first to the American market.
And this is where one of the more interesting showdowns if not comparisons about the respectability of the market itself if not firms within it, is about to happen. So far, American public companies that actually touch, deal in or handle the plant are forbidden from the SEC’s perspective because of the federal scheduling issues that still remain with cannabis.
The securities laws that govern this industry in the United States are of course, closely tied to banking law. And it is for this very reason that any public company in the United States at least, certainly where it advertises its relationship to cannabis – and in any way – is an awfully dodgy proposition. And while this has just started to become obvious because of the strength and legitimacy of the market outside the U.S., this is about to help define investors choices far better even within it. Not to mention the average consumer.
Stock Frauds And Swindles To Date
The first issues that any company has ever had to deal with in this space are finding ways to get registered on any stock exchange, for any reason. Some of the more amusing anecdotes of the last decade have actually taken place in this space – especially if you were not the unlucky one who lost it all in the process.
The travails of a company called MedBox – now Notis Global – began to get noticed a bit more seriously when the state market in the United States began to get more legal circa 2014. With an interest in cannabis vending machines that supposedly were capable of biometric identification before dispensing product as well as compliance software marketed apparently successfully at least at first to state cannabis compliance initiatives, the company had also worked their way into the dispensary license application process in several different Western states as a “consultant.”
In fact, per the SEC findings this year, the entire operation was actually literally a shell fraud game conducted by the shadow company behind it called, appropriately, “New -Age Investment Consulting.” It took over three years for the SEC to finally understand what was going on. In March, the SEC charged company executives with fraud. Specifically falsely reporting revenue that was in fact coming from a secret affiliate.
However MedBox is not the only shark in these waters. While Forbes reported the demise of MedBox, major U.S. media companies failed recently to scratch the surface of another “public” company touting both its presence to cannabis and the public markets.
When the California town of Nipton was recently bought by Medbox’s old competitor in the cannabis vending machine space, American Green, it was reported uncritically by major U.S. media including CNN and National Public Radio. The premise? They can get the water rights and permission to tap into a local aquifer to begin a canna-infused bottling plant and wellness spa in the middle of the Mohave Desert.
MassRoots is another company in this space that is also currently in trouble. It started well enough. The company is a social networking site for cannabis users billed as an alternative to Facebook for stoners worried about privacy. In reality, the site is a bit more like Facebook meets Leafly meets Weedmaps.
They also became, according to their own PR which was a bit misleading, the first “cannabis stock” to get listed on NASDAQ in 2016. Earlier this summer, the SEC also contacted the company as part of an investigation into a suspiciously timed series of emails and press releases that the agency believed had been used to move the stock price over the July 4 weekend. MassRoots denied they had done so deliberately.
What Is Real and What is Not?
It is not fair or even accurate to say that there are as of yet no “legitimate” public companies in the U.S. in the cannabis space. However it is fair to say that there are not many, yet. Further, it is becoming increasingly easier to spot the frauds. Why invest in a very questionable canna-themed Las Vegas knockoff with significant risks already dead ahead when you can invest in the Canadian or Israeli market? Or even the German one?
All of these very real firms, with real product, real sales, and much more transparent stock issuances as well as returns and real markets and customers now. And further, all are traded on OTC (over the counter) markets that are absolutely reachable for the average, qualified and knowledgeable investor.
In the meantime? Do your research. And for the most part understand that any public stock in this space in the United States, is doubly suspicious right now.
[Image credit- Wikimedia Commons]