The most common misconception about cannabis in the stock market is that the current publically traded companies and are typically ancillary or hemp based companies, not actual THC companies that are involved in the production or sale of marijuana. As long as marijuana remains scheduled as is, any company directly profiting off of the sale or production of cannabis canot be publicaly traded.
The Securities and Exchange Commission has recently closed trading with numerous publicly traded marijuana companies due to insufficient information sharing and company infidelity issues. Some of these companies include Cannabusiness Group, Inc., GrowLife, Inc., FusionFarm, Inc., and Advanced Cannabis Solutions, Inc.
This suspension of public trade came with an issued warning – or Investor Alert – that urged investors to be cautious of newly acquired trade with marijuana companies. Two of the suspensions were apparently based on additional illegal activity including unlawful activity and manipulation. Whether the grounds for these accusations are factual or not, the increased speculation is a clear reaction to the booming marijuana market.
The mindset of the pot explosion was that the marijuana industry as a whole would be a large cash crop; therefore, every individual cannabis business must yield the same bountiful reward. With all the new companies and legalization laws, government agencies are bound to be circling closely nearby, eagerly watching for opportunities to strike down “unlawful” activities and practices. In 2013, the Financial Industry Regulatory Authority remarked the industry to include several “instances of firms being run by people with criminal records.”
Happenings such as these only perpetuate the stereotype of the cannabis industry being less than legal and crime ridden. It is important that as the industry matures it will weed out the ‘bad eggs’ and allow for the true professionals to shine through. As with any industry it is important to be aware and understand all facets of a company you are looking to invest in.
Unfortunately, due to some companies executing poor business practices, skepticism is building not only with the private sector but with the SEC which could ultimately hinder the growth of the industry. Cannabis companies should not be discouraged from pursuing public trade (if they do not directly profit from marijuana), but should certainly be more aware of practices and that this industry is already under the spotlight and will remain there until being federally legalized.