Before you buy a weed stock, or tell someone else to do so, make sure you understand these fundamental risks… Richard is NOT a financial adviser, and the points expressed in this video are Richard’s opinion. Richard does not have any position in marijuana stocks.
-Some marijuana companies have been issuing shares at a rapid pace, increasing the risk of dilution for current shareholders.
-Companies acquiring their competitors face a lot of execution risk as they integrate their targets. Plants may need to shut down, employees may need to retrain, and systems may need to be updated. Any problems along the way could impact the benefit these acquisitions provide the firm.
-If provinces adopt a government-backed outlet system for selling marijuana similar to alcohol, marijuana companies could face price pressure. The outlets would have significant buying power, allowing them to demand discounts on bulk orders.
-As many of these companies are only a few years old, their accounting statements and disclosures are not of the same level of quality as more established firms. This means less information for investors looking to own the company.
– The barriers to producing marijuana are likely to fall over time. This will open the door to competitors, including large pharma companies. If a international pharmaceutical company were to open a medical marijuana operation, startups would have a hard time matching their capital commitments.
Before You Buy a Weed Stock – The Problems With Marijuana Companies