Pot shares jump as speculators see green
Investors warned of potentially fraudulent purveyors of stock connected to marijuana
NEW YORK — They’ve got high hopes.
Bruce Perlowin, the chief executive officer of Hemp Inc. who has seen his stock soar 205 per cent to eight cents in the last three days, says investors are suddenly bidding up marijuana companies because they want to find “the next Microsoft.” Robert Frichtel, his Advanced Cannabis Solutions Inc. up 144 per cent after posting $ 455 in sales last quarter, said “euphoria” is driving gains that in some cases top 1,700 per cent.
“The demand for marijuana is insatiable,” said Perlowin, a once- jailed smuggler who filed last month to sell 12 million shares of the Las Vegasbased company even as its market value holds at 99.97 per cent below the world’s biggest software maker. “You have a feeding frenzy for the birth of a new industry.”
While regulators warn of scams,
It’s people freaking out, thinking they found the next home run and doing no research.
FRANK INGARRA HEAD TRADER, NORTHCOAST ASSET MANAGEMENT LLC
some of the biggest percentage gains in the stock market this year are being enjoyed by investors speculating on marijuana penny stocks. GreenGro Technologies Inc., which provides management services for medical dispensaries, has soared 1,714 per cent to 80 cents. Tranzbyte Corp., which sells pot in Colorado, has gained more than 310 per cent in five trading sessions, crossing above a penny for the first time in 11 months.
Frenzy is afoot after Colorado became the first state to legalize sales to anyone 21 and older and New York considered reviving a law to allow some hospitals to use the drug for patients with cancer, glaucoma and other illnesses. Among 10 marijuanarelated stocks that have rallied more than 20 per cent this year, most are priced below $ 1 and trade over the counter.
“It’s people freaking out, thinking they found the next home run and doing no research,” Frank Ingarra, head trader at Greenwich, Conn.based NorthCoast Asset Management LLC, said by phone. “There might be one or two that survive, but having seen crazes like this, people have been burned by them a lot. The average investor should think twice.”
The Financial Industry Regulatory Authority issued an alert in August saying investors should beware of potentially fraudulent purveyors of stocks connected to pot and related services. Scammers may be promoting the shares, then selling them in what’s called a “pump- and- dump” scheme, the brokerage watchdog organization said in an emailed statement. It didn’t name any companies.
Eighteen states and Washington, D. C., allow the medical use of marijuana and 11 permit sales through dispensaries, according to the Denverbased National Conference of State Legislatures. National legalization has the potential to start a $ 35 billion to $ 45 billion a year industry, according to Bloomberg Industries.