6 Key Factors To Look For Before Investing In The Cannabis Industry – Minyanville.com

This article is published in collaboration with Scutify, where you can find real-time markets and stock commentary from Robert Marcin, Cody Willard and others. Download the Scutify iOS App, the Scutify Android App or visit Scutify.com.Derek ThomasIt’s difficult to identify the exact moment when the first investors began to see opportunity in marijuana. It more than likely occurred sometime shortly after California passed its medical marijuana legislation – Proposition 215 – known as the Compassionate Use Act, in 1996. Then Colorado passed Amendment 64 in 2012 and it wasn’t just incredibly optimistic speculators wanting in, but Americans from all corners of the economic landscape.Both institutional and mom-and-pop investors alike a keen to position themselves early to capitalize on what will be a billion-dollar market as the legal side of the industry gains market share through legislation.And if you have any interest in making your money work for you then you’ve probably pondered ways to benefit financially from what will be a very large market.You have two basic options: invest in a private company, or invest in a publicly traded company.Investing in private companies is often a better deal from a valuation perspective, but investors have a limited ability to sell their holdings. And besides, the SEC requires you to be an accredited investor (which the SEC defines as having $1 million in assets excluding your home or salary of $200K per year as an individual or $300K as a family) which limits many from getting involved.To be fair, there are two other options for non-accredited investors to privately invest in marijuana businesses: crowd-funding campaigns for ancillary businesses like hemp clothing lines and Initial Coin Offerings, or ICO’s, like PotCoin. Both are incredibly risky as there is either no upside for the investor (crowd-funding campaigns usually only offer a discount for products – more of a product presale – than purchasing part of the company) and the ICO market offers no protections to the investor.The publicly traded market, however, is just that – public. Anyone with a bank account and an internet connection can create an account with a broker and begin trading marijuana stocks.The first publicly traded marijuana company in the United States launched in 2009 and opened a flood gate of investment into marijuana capital markets. Now there are hundreds publicly traded cannabis companies around the world. But as this black market turns green, many opportunistic characters lurk in its midst waiting to take advantage of honest investors looking for returns.Here are some ideas on how you can protect your money in this new and potentially highly profitable arena.Start with the basics. What are your gut reactions to the professionalism of their website? Do they have a real address or is it a virtual office or UPS Store? Does someone answer the phones at the company office? Do they have a separate investor relations number? Talk with whomever answers the phones and note how the conversation made you feel about the company. Are the photos on their website their own or do they use stock photos from a third-party site? You can check for that by right-clicking on the image and choosing ‘Search Google for Image”. How does their social media look? Depending on the company and its goals, they may not be too active on snapchat but all companies should maintain a well-developed linkedin and facebook page.Research the executives. Since many cannabis companies are newer, it makes in-depth research challenging and sometime not possible at all. People, however, often have extensive digital history – both personal and professional – that is very reflective of their capabilities and intentions.Consider the exchange. The vast majority of marijuana companies in the United States are penny stocks – meaning the value of a share in the company often trades for, you guessed it, pennies. The exchange they are traded on, Over The Counter (OTC) is generally less transparent than more renowned markets like the NASDAQ or the NYSE. Even worse are Pink Sheet companies, the least transparent and least regulated of the Over The Counter traded companies. There are a few companies traded on the NASDAQ like GW Pharmaceuticals (GWPH), Insys Therapeutics (INSY), Cara Therapeutics (CARA), and Zynerba Pharmaceuticals (ZYNE). Arguably even more exciting are foreign markets that have strict reporting standards and have a much more robust public cannabis market, like Canada’s Toronto Stock Exchange (TSX) and Israeli’s Tel Aviv Stock Exchange (TASE).Check for and review the filings. First, check to make sure they even file with the SEC. Some publicly traded cannabis companies on the OTC market don’t even file their reports with the SEC! And just because a company is filing, doesn’t mean there isn’t fraud taking place. Important filings to look for and review are 10-Q’s; which are quarterly filings, 10-K’s; annual filings, 8-K’s; important updates, and Form 4’s; which provide updates about insider buying and selling.Research how they promote their stock. The vast majority of publicly traded companies market their shares to investors, but how it’s done can be very telling. Paying for positive news slots is one telling sign. Press releases are another telling sign. Are they put out only for substantive, company related news that actually manifests after its release? Or do they seem to be turning a mole-hill into a mountain every time they show up to the office?Dive into their financials. Perhaps the most difficult element of investing, but also probably the most important. A company’s capital structure is incredibly important to its success. This article does not have the bandwidth to provide the education needed to understand a company’s capital structure, but some basic googling will provide you with enough information to at least make a more-informed decision than taking a shot in the dark.This article was written by Mark Maulden for https://technical420.com/cannabis-article/6-key-factors-look-investing-cannabis-industry on .This article published in collaboration with Scutify, the best app for traders and investors. Download the Scutify iOS App, the Scutify Android App or visit Scutify.com.

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