Editor’s note: This article was first published in December 2012; it is a news piece, and its share price rally, quarterly figures (a $2 million net loss in the third quarter) and its reference to Obama as president and changing state laws are from that time.
After the sharp rise in the share price of Cannabis Science, a company listed on the OTC market, investors are getting mixed signals, as news keeps raining down in the form of puzzle pieces that have to be fitted together to try to picture where this company will be some time from now.
On the side of Cannabis Science, we have the change in the law in several states, something that could be temporary and could be reversed if Obama one day leaves the presidency and gives way to a more conservative president.
After profit-taking following the strong gains, the stock at first seemed to be collapsing, but it has found support again in a recent study claiming that cannabis can stop metastasis in some aggressive types of cancer. Of course, the same study says a way should be found for marijuana to be taken not by smoking it but as pills or by injection, so that it can be more effective in treatments. Either way, investors are buying Cannabis Science again.
Now, what has to be digested are the quarterly results the company has published, because the risk is extremely high. In its quarterly report, the company shows these worrying numbers:
Cannabis Science has $9,000 in cash, money that could not fund even a single study.
It has $3.3 million in current liabilities and earned only $1,800 in revenue in the whole quarter (and I have no idea where that came from).
The net loss for the third quarter is $2 million, and the cumulative net loss over the three quarters is about $14 million.
And you could say these figures are positive, because the company has managed to double its cash and, in a way, hold its losses at $2 million, when it could have been much worse.
The bad news is that this company does not have a single product on the market: so far, all it has are potential products in the pre-clinical stage. In other words, they might never reach the market, and the company would then have no business.
As I said at the start, investing in this company means investing with a great deal of faith, in the hope that it will eventually bring a product to market, although the risk is extremely high.
Further reading
- 10 mistakes to avoid when investing
- Which investments are most profitable for reaching financial freedom?
Featured image: Cannabis Tours, CC BY-SA 4.0, via Wikimedia Commons.
