Thanks for tuning in and hopefully this contributes to your understanding of the current market sentiment surrounding the privately held cannabis space now. Please let me know if there are any comments, concerns or any areas you would like to see us expanded upon for future exploration. You can reach out to me on Twitter via @rhum01
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Cons:
1
Shell company problems - As is recommended for any investment you should always do your due diligence. When a private company performs an RTO of a company that is currently listed there is a possibility that this shell company they are acquiring will come with its own baggage or skeletons that will need to be addressed. It would not be in investors best interest to finally go public but then realize the shell company they went public though had some massive lawsuit against it or some other associated problems.
2
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Pump and dump - While this phenomenon is not isolated to an RTO, there are many skeptics out there that associate RTO’s with a classic pump and dump scheme. For those of you not familiar with the terminology, it basically means a lot of hype is built up and promoted surrounding the stock and then all of the shares sold at their highs to unsuspecting retail investors. The reason people are more skeptical of RTO’s being labeled as such stems from the fact that the whole process is generally sped up and this in part can raise some eyebrows. One thing to look for if considering an RTO is insider selling. If you see lots of insider selling as soon as the company becomes publicly traded this should be used as a potential red flag.