Under Joe Biden, Cannabis Stocks Will Have A ‘GameStop Moment’— Just Like They Have Before
February 2, 2021
Best online weed store.Submitted by
Marijuana News on Tue, 02/02/2021 – 10:17
Quick—name the first cannabis industry
If you said Canopy Growth, or GW
Pharmaceuticals, or a marijuana company
currently in business, you’ve forgotten the
amazing rise and fall
of Medbox. Best online weed store
The first publicly trade “cannabis company”
to exceed $1 billion in value (at least on the
exchanges, “real” enough by our rational
market’s standards) way back in 2012,
Medbox wasn’t a company at all so much
Securities and Exchange Commission
discover, a hustle that took advantage
of irrational hype cycles to bamboozle
ill-informed retail investors.
Hmm. Does this sound at all familiar, in
early 2021? It’s worth revisiting the
Medbox story in the context of the
still-ongoing GameStop stock Armageddon,
since it’s happening at the same time
NEW YORK, USA – JANUARY 28: A group
of demonstrators are gather by the New
York Stock Exchange … [+]
ANADOLU AGENCY VIA GETTY IMAGES
With near-unprecedente attention on the
stock market inspiring even antimaterialists
to research “naked shorts” and ponder
downloading the Robinhood app, retail
investors with positions in cannabis
companies ought to remember that absurd
valuations, triggered by hype cycles,
have a longer history than r/wallstreetbets.
And while weed companies
creating billion-dollar value out of absolutely nothing may not happen again—that’s what the SEC is for—irrational hype cycles are part of the landscape in cannabis investing. And this is without a flood of Reddit posters pumping companies.
Nationwide legalization is coming in Mexico. Both the US Congress and heavily populated East Coast states are pondering cannabis reform. Billions of dollars of cannabis were sell last year! Jay Z has a weed brand!
There won’t be “another
Medbox” in weed, given how far the industry has come in the past decade, but analysts have predicted exaggerate inflations, follow by damaging corrections. And we’ve already seen this happen since President Joseph R. Biden, Jr. was elect in November.
What does Joe Biden as president mean for cannabis businesses? Well, nothing, really. Biden didn’t promise to legalize marijuana while campaigning. Biden has not said a word about reforming the Controlled Substances Act. But Biden is a Democrat, and there are a lot of Democrats who are pro-marijuana—and Biden’s nominee for attorney general, Merrick Garland, is unlikely to pull a Jeff Sessions and use his position to start bullying weed companies.
And so the market responded. Cannabis stocks jumped in November, and then jumped again in early January, after Raphael Warnock and Jon Ossoff won Democratic control of the US Senate. There were big gains in cannabis, including companies based in Canada. What do Canadian companies, that aren’t involve in the US market, have to do with Joe Biden and Jon Ossoff?
Nothing, but since investors
“know” cannabis legalization is coming, and since that means cannabis is a “good investment,” investors go out and buy some of the only cannabis securities available to them.
This trend suggests that r/wallstreetbets or another online forum could easily target a cannabis company as a buy target and inflate its value, with that company doing absolutely nothing to necessarily deserve an enormous rise in value.
There’s a recent example of how even a press release can briefly inflate a cannabis stock’s value, only for a “correction” to wipe out those gains.
On Jan. 19, former Beverly Hills
renter and Instagram celebrity Dan Bilzerian, who in addition to posting is the founder and CEO of a company involve in cannabis call Ignite, post good news. After years of epic losses, Ignite—which had lost $50 million in 2019, cash Bilzerian is allege to have fritter away on rent, travel, and an enormous bed—finally broke even in the fourth quarter of 2020, according to a company press release.
“I guess the press and the dumb… YouTubers were wrong,” posted Bilzerian, who briefly saw his net worth balloon: Share prices in Ignite skyrocket nearly 300 percent, from $0.56 Canadian to $1.54.
But at least so far, the only publicly available proof of Ignite’s new gains are in a press release. Audit financial statements aren’t due for another few months—and this is a company that’s drowning in debt, that doesn’t really have a clear brand identity or a signature product, that’s have one break-even quarter.
Not the greatest fundamentals!
So the correction came. Ten days later, Ignite shares are still up, but have lost almost 50 percent since their high. Anyone who bought after reading Dan Bilzerian’s tweet lost money.
What’s next? “Everything suggests that a Biden administration will federally legalize cannabis,” John Ramsay, CEO of Infinite CBD, a Colorado-based cannabis company, told Nasdaq.com earlier this month. Is that right?
The Democrats have a 50-50 “majority” in the US Senate, with Vice President Kamala Harris, who is the president of the Senate, the tiebreaking vote. Harris likes legalization and was the sponsor of a Senate bill that would have descheduled cannabis.
So let’s say that bill gets a hearing in the US Senate. That would be a big deal—it would be the first time the Senate so much as considered such a move. Pot stocks will jump.Best online weed store
Let’s say that bill passes committee—whoa! Bigger jump. Let’s get crazy—the bill is sign! Look out, everyone, here come the rocketship gains… but wait.
Many states will still
have laws criminalizing weed on the books. Others have locked-in markets, with the number of licenses capped by statute. Without fundamentals—without licenses, without books not saddled with debt, a correction will come.
“Everyone knows” that marijuana legalization is coming. Fewer people know exactly what that means. Anyone who’s invested in cannabis for four or five years—long enough to witness first-hand the great Canadian cannabis boom-and-bust cycle of 2016-2018—knows full well how vulnerable their sector of the market is to exuberant hype cycles.
Weed’s had a GameStop moment before. All signs suggest that it could easily happen again.