Investors Warned About Shady Pot Stocks

Here's how to avoid shady investments.

Photo Credit: Peter Kim / Shutterstock.com

There are medical marijuana businesses in Canada that have solid plans to grow and sell medical cannabis.

But there appear to be many more with no actual connection to soil-based operations that are nonetheless issuing stock and baiting investors with what might be a risky place to put your cash.

That’s the contention of the Canadian Securities Administrators, which issued a warning about pot stocks yesterday. According to the CSA:

While some have touted medical marijuana as a significant new sector for investment, the CSA has observed a number of small or inactive reporting issuers announcing medical marijuana business plans. In many of these cases, just the announcement of intent to develop a medical marijuana business has resulted in an immediate rise in a company’s stock price. The CSA is concerned investors may face financial harm by purchasing such shares at an inflated price before there is a viable business.

Sounds familiar. There’s a pot gold rush going on. But some outfits don’t really have their hands on the gold.

What’s more, the Canadian Securities Administrators say, it’s not easy to legally grow cannabis in Canada:

Investors should be aware that companies cannot legally conduct a medical marijuana business without a licence from Health Canada, and that there is likely significant time and cost required to obtain such a licence.

The U.S. Securities and Exchange Commission has also alerted investors to potentially shady stock issues.

You can find out which firms have legitimate licenses to grow in Canada here. And, as always, whether your on a back street or on Wall Street, buyer beware.

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