Marijuana News Today
Today is a fairly grim day for marijuana news as the pot stock market has finally begun to correct after several weeks of outrageous gains, and the U.S. Securities and Exchange Commission (SEC) has warned investors to be wary of “scam artists” operating in the marijuana industry.
The SEC note was primarily concerned with investment fraud, stating that crooks will be drawn to the marijuana industry due to its success.
The release laid out several key tools that investors can use to avoid fraud, listed below:
Unlicensed, unregistered sellers. Unlicensed, unregistered persons commit many of the securities frauds that target individual, Main Street investors. Check out the background, including registration or license status, of anyone recommending or selling an investment, using the free simple search tool on Investor.gov.
Guaranteed returns. If someone promises you a guaranteed high rate of return on your investment, especially along with a claim of no risk, it likely is a fraudulent scheme.
Unsolicited offers. If someone reaches out to you through social media, an e-mail, a text, or a phone call regarding an investment “opportunity,” it may be part of a scam.
(Source: “Investor Alert: Marijuana Investments and Fraud,” Investor.gov, September 5, 2018.)
While all these may sound like common sense, you’d be surprised how uncommon due diligence can be.
The upshot of the note is to not be taken in by lofty promises of guaranteed massive gains—there’s always risk involved and nothing is promised. But of course, that risk and volatility is what generates such massive returns out of pot stocks.
The note goes on to mention that investors ought to be aware of market manipulation, where scammers will release false information about their stock in order to artificially inflate prices.
This typically happens among smaller micro-cap stocks and penny stocks.
These smaller companies—especially ones operating solely in the over-the-counter (OTC) markets, which are therefore unlisted on trusted, major exchanges—are able to manipulate their stock prices far more easily due to their size, should they choose to do so.
While fraud takes place in all industries, pot stocks are sucking so much oxygen out of the room right now that the headlines are drawing less savory individuals to the bull market.
There’s tons of money to be made in the marijuana industry—but ideally, our readers are trying to do so in accordance with the law.
In any case, the marijuana news today shows that these fraudsters are growing in number and that investors should exercise a degree of caution, especially with too-good-to-be-true fund promises and micro-cap companies that strictly trade OTC.
The pot stock market has encountered what I’ve been saying is a long time coming—a correction.
The good times could only roll along for so long before the market decided that it had had enough and needed to cool it.
We’re seeing massive dips across the industry this morning, some as high as double digits.
Which brings us to Tilray Inc (NASDAQ:TLRY).
Tilray stock found itself down over 10% at one point in early morning trading, but it has rebounded nicely and now rests at a five-point dip to start the morning.
Over the past five days, however, the company is up nearly 30%.
We’ll have to wait and see what the final results will be on the day, however, as the stock is too volatile to predict with any degree of accuracy. Today still may see Tilray stock gain value.
The company has been the focus of a lot of scrutiny lately. In fact, I feel downright prophetic as just yesterday I wrote that a Tilray stock correction was on the way.
The scrutiny, as my other piece points out, is not entirely unwarranted.
The company has a massive valuation without having the numbers to really justify its market cap. Having been built more on the potential of the marijuana market (which is more than capable of squaring Tilray stock with its valuation) and the fact that TLRY stock was the first marijuana initial public offering (IPO) on the Nasdaq, it’s a darling of sorts to American investors.
Its triple-digit gains since its IPO are a testament to that preferred status among U.S. investors.
All that being said, there is still a ton of value in TLRY stock. And that’s why the dip today could either be a flash in the pan or the sign of a longer correction.
Canopy Growth Stock
Following a similar path to TLRY stock, Canopy Growth Corp (NYSE:CGC) was down big to start the day, dipping by as many as 10 points before rallying to being only four points down, and climbing.
It appears that these stocks will be able to steer clear of big losses today, but again, it is still too early to call.
Expect today to be extremely volatile.
As for CGC stock itself, it has so far been a quiet week for the company.
Up about five percent over the past five days, CGC stock has been out of the headlines. Of course, the massive $3.8-billion investment from Constellation Brands, Inc. (NYSE:STZ) set this whole bull rush in motion and was the biggest marijuana news of the year so far, so it has hardly been a quiet period for CGC stock overall, simply a quiet week.
In any case, CGC still looks strong, remaining one of my favorite pot stocks.
Cronos Group Inc (NASDAQ:CRON), Tilray’s predecessor on the Nasdaq and the first pure-play marijuana stock to enter the exchange, is also caught up in the volatility of the morning.
At one point down double digits, CRON stock is now holding at a four-point fall.
CRON stock made waves this week when it announced that it had partnered up with Ginkgo Bioworks Inc. to genetically engineer the active compounds found in marijuana, a deal valued at $122.0 million.
This move sent CRON stock soaring and was a huge boon to the company to start the week.
It’s like going into “a foot race with a Formula One race car,” Mike Gorenstein, chief executive officer of Toronto-based Cronos, said in an interview with Bloomberg about the advantages of the deal. (Source: “Cronos Partners With Ginkgo to Develop Lab-Grown Cannabis,” Bloomberg, September 4, 2018.)
If this tech move pans out, then CRON stock could be in store for even bigger gains down the line.
TLRY, CRON, and CGC Stock Performances
In the chart below are the recent performances of the stocks for Tilray Inc (black line), Canopy Growth Corp (blue line), and Cronos Group Inc (red line):
Chart courtesy of StockCharts.com
The marijuana news today is dark, but not horrible.
The SEC warnings are to be expected as the industry grows, drawing in all sorts. It is good, however, to be reminded of safe investing practices now and again.
As for the pot stock market, now we watch and wait to see if these drops continue as part of a larger correction, or if they are simply a sudden dip and we return to gains as early as tomorrow.