Bloom is off pot stocks
Marijuana turns into a bummer for many investors
Wall Street seems to be losing its appetite for pot.
Marijuana stocks were high fliers — so to speak — after Colorado and Washington legalized recreational use and several other states announced they may legalize sales or decriminalize possession. Shares in about 20 marijuana-related companies soared: Some gained more than 700% off 52-week lows.
But marijuana mania is fading as investors realize there’s more smoke than fire at many companies, which show “pot-tential” but little revenue. CannaVest, which specializes in industrial hemp, had climbed to $201 a share last month. It closed up 11% to $68.10 Friday, but it has lost nearly twothirds of its market value.
Earlier in the week, the company suggested it is still a bit of a gamble, saying it is “continuing its plans to be in the forefront of establishing a domestic industrial cultivation and production infrastructure” and that it’s “partnering and collaborating on research and pilot projects in states where hemp has been legalized.”
Vape Holdings, which markets marijuana vaporizers and e-cigarettes, is priced at $28.39. It traded more than 40% higher earlier this month. AVT, a manufacturer of medical marijuana dispensers, is down 50% from its January high of $8.
Many pot stocks are thinly traded “pink sheet” stocks, little followed by stock analysts and able to forgo the financial reporting requirements of larger, more established companies.
Among them, GreenGro Tech, trading at 57 cents, is now off 53% from its $1.20 peak in January. Cannabis Sativa, now at $10, is 44% below an $18 high. Medical Marijuana, at 32 cents, is off 35% from a 52-week high. Cannabusiness Group, down 23% Friday to 21 cents, has sunk 56% from Tuesday’s 48-cent peak. Hemp Inc., which traded at 34 cents Feb. 5, is at 11 cents, a 68% fall.
Aventura Equities, which holds licensing rights to medical marijuana products, trades at 9 cents. On Feb. 26, CEO Richard Armstrong said loyal shareholders “have an opportunity to participate in an industry sector that will reward their patience.” Shares closed at 41 cents that day, 720% higher than current levels.
The Financial Industry Regulatory Authority says investors should remain wary and research pot stocks before they buy.
“These stocks can be incredibly volatile, and you can see significant prices swings with low trading volume,” says Gerri Walsh, head of FINRA’s investor education. FINRA issued an alert last August, saying scammers were touting the stocks, riding fat gains and then dumping them.