Smoke and Mirrors Envelop Marijuana Stock
NEW YORK (MainStreet) The high hopes investors have in Hemp Inc. may be unrealistic and even a pipe dream. Although CEO Bruce Perlowin's stock soared 205% in the last three days, critics think investors are barking up the wrong tree.
"The run up in marijuana stocks indicates that people are trying to get in on the ground floor, but it's never smart to invest in penny stocks, because they might not make it to the board," said Darrin C. Duber-Smith, marketing professor at Metropolitan State University of Denver. Hemp Inc is currently trading at 8 cents while Advanced Cannabis Solutions is up 144% after posting $455 million in sales last quarter.
"It's notable that an ex-con weed smuggler has discovered it's more profitable to sell marijuana stocks than it is to sell weed," said David Downs, editor of a San Francisco Chronicle blog called Smell The Truth. A more likely candidate to sweep the country the way that Microsoft did would be on the manufacturing supply side.
"Every dispensary has to supply itself with marijuana so growing equipment is key," said Duber-Smith. "One of the best ways to get in on the ground floor would be to invest in a growing equipment company. Every dispensary needs sophisticated growing equipment because they are running out of pot until the next harvest."
For example, R-Quest Hydroponics is a developer of the environmental master controller for medical and recreational marijuana hydroponic gardens. IMD Companies announced this week that it formed a partnership with Anything Technologies Media by acquiring a 51% interest in R-Quest Hydroponics. The company paid 100 million common restricted shares to Anything Technologies Media.
"This company is more investable, because growing is the only part of the industry that's really solid," Duber-Smith told MainStreet. "Equipment can be used to grow anything, and it doesn't have the same stigma attached to it as a dispensary. It's more dignified to be invested in a company called IMD or R-Quest Hydrophonics than a company called HEMP."
The risk inherent in investing in any marijuana company at this time has to do with the fact that marijuana is still federally illegal and is considered a social taboo by many.
"It's a gamble," Downs told MainStreet. "Your best laid business plans or best intentions investing in a known marijuana company can be snuffed out by a handful of church ladies or a police chief that does not want to see marijuana legally available in their neighborhood."
--Written by Juliette Fairley for MainStreet