26
Companies (especially legal cannabis producers) are attracting millions of investment dollars to attract/retain customers and/or build capacity for the future market. This is especially true in Canada where nation-wide legalization, in some form, of recreational use of cannabis is expected before mid-2019 all the while the number of patients using medical cannabis continues to grow. In fact, there is only a pledge by the Canadian Government that it plans to introduce legislation in early 2017 that will pave the way for the eventual legalization of recreational cannabis. Despite this fact, Licenced Producers are raising millions of dollars through oversubscribed financing to build excess capacity to meet the demand for this anticipated recreational market in addition to actual growing medical marijuana demand. This certainly does appear to be text-book “dot.com” as companies incur large upfront expenses (based only on a pledge to introduce a plan) that translates into losses building excess capacity for anticipated future demand. Demand that relies on yet to be introduced legislation. Similarly, right here in the US, how many businesses stand to expand or retract from the outcome of November ballot measures as well as from the outcome of the Election itself? Here are a few of the more common references given to show that this is just another dot.com type industry:
⦁Many companies are still at the concept stage yet are raising money in order to initiate the application process, and/or to be ready for what they expect to be the outcome of the November election and various ballot measures.
⦁Invest at your own risk (in other words - invest elsewhere)! Nick Easley, in the April 2016 issue of CANNAINVESTOR MAGAZINE stated:
Investing in the cannabis industry is fraught with risk. Not only do companies in the cannabis space face the same risks as other industry companies (financial, market, competition, product/service efficacy, and more), but also adding cannabis stigmatization combined with legal and compliance risks makes the industry a minefield for investors.
⦁Valuations of companies seem to defy the principles of basic investment theory. This is often the most referenced “fact” because math is math. One can show the current market valuation of a company and compare that to the valuation of the company based on basic investment theory and principles.
⦁Dishonest businesses! The SEC recently issued a press titled “Marijuana-Related Company Charged with Scheming Investors”. Fraud charges were laid against the CEO at Fusion Pharm Inc.
⦁Marijuana is a Schedule 1 drug and remains illegal Federally with companies unable to use the Banking system or claim business related expenses for tax purposes (IRC 280E).