• 12 hours Why Germany Is Going To War With Gold
  • 2 days Gold Is Still Cheap Compared To Stocks
  • 2 days Are Cryptocurrencies Funding Terrorism?
  • 3 days Promising Oil Companies To Watch In 2020
  • 3 days Could China's Coronavirus Outbreak Impact U.S. Stocks?
  • 4 days Tesla Stock Continues To Soar
  • 4 days What New Economic Data Reveals About Gold's Trajectory
  • 5 days The Lucrative New Tech Hijacking Your Privacy
  • 6 days The Biggest Loser In The China-U.S. Tariff Tit-For-Tat
  • 6 days Trade War Takes Its Toll On Shipping
  • 9 days Is $90 Oil Possible? An Interview With Jay Park
  • 9 days Billions Of Dollars Are Flooding Into The Flying Taxi Space
  • 10 days Is This The Most Important Energy Project Of 2020?
  • 10 days Startups Are Dying To Give You A Better Death
  • 11 days U.S. Restaurants Are Struggling With Rising Labor Costs
  • 11 days The Banking Bonanza Is Just Getting Started
  • 12 days How The Trade War Ceasefire Will Impact The Energy Industry
  • 12 days Who Is The Most Dangerous Person On The Internet?
  • 13 days SoftBank Sees First Quarterly Loss In 14 Years
  • 15 days Prepare For An Oil Glut In 2020
Could China's Coronavirus Outbreak Impact U.S. Stocks?

Could China's Coronavirus Outbreak Impact U.S. Stocks?

Millions of Chinese are expected…

Promising Oil Companies To Watch In 2020

Promising Oil Companies To Watch In 2020

It’s no secret that energy…

Tesla Stock Continues To Soar

Tesla Stock Continues To Soar

Since the beginning of January,…

  1. Home
  2. Investing
  3. Stocks

Are SEC Cannabis Concerns Overblown?

MJ

Now that Cannabis stocks are suddenly shooting through the roof and even bears are jumping on board as whiskey, vodka and beer companies start buying stakes, the SEC is worried.

This could end up being the next big hotbed of manipulation, the SEC said in a warning to investors on Thursday.

“Scam artists often exploit ‘hot’ industries to trick investors, including by making false promises of high returns with low risks,” the SEC said, and its Office of Investor Education and Advocacy (OIEA) “regularly receives complaints about marijuana-related investments.”

The SEC is most concerned about unlicensed, unregistered sellers targeting individual, Main Street investor. It’s also worried about promises of guaranteed returns and claims of no risk. Finally, unsolicited offers are also a red flag, particularly with the prevalence of social media as a new boiler room tool.

And there’s every reason to be concerned. When even uber-bears and major short-sellers suddenly start getting in on marijuana stocks, things can get a bit out of hand.

The catalyst for the big run, of course, was Canada’s legalization of recreational marijuana when it was finally approved in June. Canada will become the first industrialized nation in the world to have legalized pot, recreationally. And it goes into effect on October 17th.

Since June, everyone’s started lining things up in earnest. Major international companies are looking to strike mega deals with cannabis companies. Related: Cryptos Pummeled Again On New SEC Attack

Now, it’s more than a big run from a great catalyst—it’s a pure rampage that was launched when Diageo PLC, the maker of Johnnie Walker and Smirnoff—revealed it was in talks with three Canadian pot companies for a stake or partnership in the last week of August. Right before that, Constellation, the maker of Corona Beer, invested $4 billion in Canopy Growth, raising its stake in the cannabis producer from 9.9 percent to 38 percent.

This is what the last month has looked like for the Global Cannabis Stock Index:

(Click to enlarge)

Source: New Cannabis Ventures

Canopy Growth (NYSE:CGC) is already trading at over $52, up from under $30 a month ago.

(Click to enlarge)

Aurora Cannabis Inc (OTCQX:ACBFF) is now trading over $8 a share, up from under $6 a month ago. And then there’s Tilray (NASDAQ:TLRY), which only went public in July has seen its market value more than triple. It now has a $7.87 billion market cap.

(Click to enlarge)

The Canadian-listed marijuana ETF, Horizons Marijuana Life Sciences Index ETF (HMMJ), has passed the $1 billion mark in assets as of last Friday.

So, yes, everyone’s getting excited—and that’s exactly where the SEC feels it needs to step in with a bit of advice to calm everyone down.

This is where the SEC plays parental unit to investor FOMO. The concern is for those who feel they have missed the boat on this first round, when they played it safe and watched on the sidelines as Canada legalized recreational pot.

But are the SEC concerns justified? 

A hedge-funder that bet big against the housing market prior to the 2008 crash says cannabis is “the big long.”

Danny Moses' short-selling exploits have been chronicled in Michael Lewis' best-seller "The Big Short: Inside the Doomsday Machine," as well as Academy Award-winning movie “The Big Short.”

Now, Moses has backed up his faith in pot stocks by investing in private equity firm Merida Capital, which is focusing on the burgeoning legal cannabis sector.

As Moses advised, patience is the name of the game. Maybe only ultra-longs need apply.

By David Craggen for Safehaven.com 

More Top Reads From Safehaven.com

Back to homepage

Leave a comment

Leave a comment