It’s difficult to identify the exact moment when the first investors began to see opportunity in marijuana. It more than likely occurred sometime shortly after California passed its medical marijuana legislation – Proposition 215 – known as the Compassionate Use Act, in 1996. Then Colorado passed Amendment 64 in 2012 and it wasn’t just incredibly optimistic speculators wanting in, but Americans from all corners of the economic landscape.
Both institutional and mom-and-pop investors alike a keen to position themselves early to capitalize on what will be a billion-dollar market as the legal side of the industry gains market share through legislation.
And if you have any interest in making your money work for you then you’ve probably pondered ways to benefit financially from what will be a very large market.
You have two basic options: invest in a private company, or invest in a publicly traded company.
Investing in private companies is often a better deal from a valuation perspective, but investors have a limited ability to sell their holdings. And besides, the SEC requires you to be an accredited investor (which the SEC defines as having $1 million in assets excluding your home or salary of $200K per year as an individual or $300K as a family) which limits many from getting involved.
To be fair, there are two other options for non-accredited investors to privately invest in marijuana businesses: crowd-funding campaigns for ancillary businesses like hemp clothing lines and Initial Coin Offerings, or ICO’s, like PotCoin. Both are incredibly risky as there is either no upside for the investor (crowd-funding campaigns usually only offer a discount for products – more of a product presale – than purchasing part of the company) and the ICO market offers no protections to the investor.
The publicly traded market, however, is just that – public. Anyone with a bank account and an internet connection can create an account with a broker and begin trading marijuana stocks.
Here are some ideas on how you can protect your money in this new and potentially highly profitable arena.
- Start with the basics. What are your gut reactions to the professionalism of their website? Do they have a real address or is it a virtual office or UPS Store? Does someone answer the phones at the company office? Do they have a separate investor relations number? Talk with whomever answers the phones and note how the conversation made you feel about the company. Are the photos on their website their own or do they use stock photos from a third-party site? You can check for that by right-clicking on the image and choosing ‘Search Google for Image”. How does their social media look? Depending on the company and its goals, they may not be too active on snapchat but all companies should maintain a well-developed linkedin and facebook page.
- Research the executives. Since many cannabis companies are newer, it makes in-depth research challenging and sometime not possible at all. People, however, often have extensive digital history – both personal and professional – that is very reflective of their capabilities and intentions.
credit:420intel.com