Editor’s note: This article was first published in January 2014, when legal sales of marijuana began in Colorado; the share moves (+60% and +22%), Cannabis Science’s financial figures, the 12,000% five-year gain and the €100 broker fee per trade are from that time. Over-the-counter penny stocks are extremely speculative and many lose most of their value. This January 2014 article is not investment advice.
On the back of the news that the sale of marijuana is now legal in Colorado, the listed companies Cannabis Science (OTCMKTS:CBIS) and Medical Marijuana Inc. (OTCMKTS:MJNA) are shooting up again. Cannabis Science is up more than 60% right now, while Medical Marijuana is up 22%. So buying interest in these companies is back, and, as usual, we urge caution.
Although both companies move to the beat of cannabis legalisation, they are as different as night and day. The last time I wrote about Cannabis Science, it was to say that it was a religious investment, because only faith would save you from losing money on a company that, at the time, did not have a single product to sell, had an accumulated net loss of 14 million, $9,000 in cash and practically zero revenue. Little has changed since then, apart from the news of legalisation in one state.
On top of that, Cannabis Science has performed terribly on the stock market: every strong rebound has been followed by an equally sharp correction.
At the other end we have Medical Marijuana, which, although it is another company on the OTC Markets, has a somewhat more serious business: it patents and sells cannabinoid-based products, as well as the technologies this industry needs. Even so, for now its business also feeds mainly on hope, with the obvious danger of governments changing the rules.
Of course, unlike Cannabis Science, this company has gained more than 12,000% over the last five years. If only I’d known…
So, should you invest in these companies or not?
Some time ago I suggested that, as an act of pure speculation, we could buy €100 or €200 worth of this kind of company that we think could be very profitable in the future. Bear in mind, though, that buying on the OTC Markets is not cheap: my broker in Spain, at least, charges me €100 for the buy order and another €100 for the sell order.
That is how I ended up with a holding of Herborium shares that would cost me less to give away than to sell. With this kind of company, taking a 90% fall is quite normal. Both companies are for high-risk investors.
Featured image: Jeffrey Beall, CC BY-SA 3.0, via Wikimedia Commons.
