Marijuana Stocks: What Happened?

Posted on by Brian Colwell

I recently saw several Marijuana Stock articles come across my Twitter feed… and I remembered Marijuana Stocks getting killed over the last couple years… So I asked myself, “What happened to the Pot Stocks?”

1. “The ‘Marijuana Revolution’ is the next great American industry boom”

  • Similar to the Internet Boom and Gold Rush, this industry is going to create unimaginable amounts of wealth while providing economic support by adding thousands of new jobs across the country
  • This initial hype was quite evident as several publicly traded “marijuana” stocks exploded to unforeseen levels as the average investor blindly rushed into the sector for fear of missing the boom
  • Did the activity create great awareness for the industry and put a lot of companies on the map? Yes. But was it all warranted? Absolutely not.

2. The “boom” only lasted a few months before crashing back to Earth

  • On the back of profit taking, insider dilution, and SEC trading suspensions
  • Many of the companies who saw triple even quadruple digit gains in a very short period of time in fact had zero operations in the marijuana sector at all but rather a clever press release and/or company name change to include some form of the word “cannabis”
  • So although the ride was fun it was short-lived and unsustainable
  • And, unfortunately, left many average investors scorn and skeptical about the industry’s future

3. The truth is that it all happened too fast

  • The marijuana industry ran before it walked, actually it did cartwheels before it was crawling
  • The state of the industry did not warrant the type of trading activity we saw
  • For the most part there was no revenue, no product, no licenses, just ideas and business plans
  • So it’s only normal that the market correct itself and start over with realistic valuations after Colorado accepted marijuana on a recreational level, the catalyst that really sparked it all
  • This action shouldn’t scare investors it should give them confidence that they have the opportunity to invest in companies that are part of the next great American industry rush at reasonable, possibly even undervalued valuations

4. Marijuana advocates upset at the SEC for “destroying” the market

  • This could not be any farther from the truth
  • The action taken by the SEC was the best thing for the future of this industry
  • The regulators acted swiftly and strongly to weed out the garbage companies trying to capitalize and take advantage of unsuspecting investors by issuing false and untrue press releases about their business operations
  • This cleaned up the industry and helped investors better identify the quality companies in the space versus the crap

2 thoughts on “Marijuana Stocks: What Happened?”

  1. Nicely written, and solid analysis of an industry that will inevitably become an American staple. The decision by NASDAQ is a bit alarming… Reminds me of the obstacle that many retail marijuana companies are facing in that they aren’t able to open bank accounts since the banks are regulated on the federal level… and marijuana is still illegal on the federal level.

    Without the opportunity to have their companies trade publicly, raising capital will be a challenge for the time being. Eventually, everything will sort itself out as marijuana slowly becomes legal recreationally in more and more states, but until then, the industry faces these challenges.

    Any new industry faces challenges and regulatory obstacles… Consider Uber and Lyft… Though they aren’t facing as much resistance as marijuana companies, their industry has also had to navigate around similar roadblocks (excuse the pun).

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