Cannabis stocks have had an unstable track record since the start, causing many investors to have their doubts. Medical Marijuana, Inc. is one such over-the-counter (OTC) cannabis stock that has had a less than successful stretch on the stock market. Launching in April 26, 2009, it had a closing term at 60 cents per share and, 5 years later, a closing term at 4 cents per share.
It seems the future success of cannabis stocks is tied to much more than the product itself.
Regardless of changes in policies and the legalization of medical and recreational use of marijuana in several states, investors struggle to see the potential of cannabis stocks because of mismanagement on a wide scale. In addition to Medical Marijuana, Inc., the company Medbox, Inc., which specializes in vending machines that dispense a miscellany of medical products including marijuana for medical use, is on the market for less than 5 cents per share since December of 2015. The price was at an all time high of $100.99 on January 7, 2013.
There are several other OTC cannabis stocks, such as General Cannabis Corporation, Cannabis Science, and Cannabis Sativa, Inc. with less than impressive performance in the stock market. The lack of success can possibly be linked to the same problem: mismanagement.
In addition to bad management, investors are troubled by the fact that most of these cannabis stocks are high risk and considered penny stocks.
Mismanagement being one of the root causes of failure, there is a well-reviewed private equity firm in Seattle, Privateer Holdings, making waves with its goal to properly manage businesses with marijuana-based products. The effort is starting with recreating cannabis stocks namesake as a reputable business. One approach they’re using to create good repute is promoting the usage of “cannabis” over the common name marijuana and other nicknames, a strategy that has garnered Privateer much attention.
The efforts of Privateer Holdings to obtain good standing for industries distributing marijuana is critical in the its in early stages.
The advantage of the Privateer Holdings approach exceeds the success of cannabis stocks as several state and federal legislative strategies benefit from premier marijuana businesses maintaining upstanding operations.
The use of marijuana for medical purposes has been legalized in 29 states while recreational use has been legalized in 8 states and the District of Columbia. Although legalization has been obtained in several states, federal law still classifies marijuana as a Schedule I Controlled Substance, placing it in the same category as heroin, following the Controlled Substances Act (CSA) (21 U.S.C. § 811). In spite of that, Congress’ 2016 omnibus spending bill prohibits federal agents from conducting raids on state legalized medical marijuana businesses/dispensaries.
Concerning the legalization of marijuana for recreational use, the following states approved it for sale and use: Colorado, Alaska, California, Nevada, Oregon, Washington state, Maine, Massachusetts, and the District of Columbia. Colorado and Washington state were the first to legalize marijuana for both purposes. States approving recreational use in addition to medical use probably dumbfounds several federal lawmakers.
For the time being, Privateer Holdings sustains making preparations for the complete legalization of marijuana, which means more institutional investors in cannabis stocks.
A timeline of their achievements is featured on their site. The results of Privateer’s Series A funding round demonstrated funds up to $7 million; in 2010 Leafly, a cannabis associated website with a mobile app; in October of 2013, Tilray, the first of American companies to obtain federal licensure in Canada; in 2014 Marley Natural, a global cannabis brand; and, also in 2014, Goodship, a collection of cannabis bakeries, to name a few of their accomplishments. Privateer Holdings followed up the first round of funding with a Series B funding round of $75 million.
Canada is believed to be ahead of the United States in large scale legalization. Prime Minister Justin Trudeau of Canada has already presented sound legislation for the legalization of marijuana. Critics expect it won’t be long before a federal process begins.
Privateer Holdings is in prime position to make huge profits on cannabis stocks, marketing several products, from medical use to body care, accessories, and edibles, etc.
What’s the long term success of cannabis stocks in relation to large scale marijuana legalization?
Once legalized, regulations will determine what businesses and individuals can grow and possess marijuana. Many believe THC, short for tetrahydrocannabinol, the chemical responsible for marijuana’s mind-altering effects, will determine the longevity of cannabis stocks. Some studies show users may become addicted to this chemical. There are several critics asking what will state and federal legislature require to constrain the black market after legalization?
The success of cannabis stocks for medical and recreational purposes now, and after legalization in Canada, and in America, depends on the tactics developed and utilized by private firms such as Privateer Holdings. Their commitment, and other companies like them, to properly manage cannabis stocks alongside their promotion of a “clean” product, will determine whether or not there will be a favorable outcome when legalization occurs.
(To learn more about legalization of marijuana use, read Vermont Goes Green! More Good News for Marijuana Stocks.)