Avoid the Bag! Beware penny stock Marijuana Pump & Dumps! Marijuana hype is bubbling again thanks to a number of U.S. states voting to legalize recreational use and with Canada poised to do the same this coming spring. No doubt there will be some long term winners, but as with any bubble they'll be few and far between. And even those that do win, the payoff is not going to be as monstrous as many believe.
Why is everyone so excited? Marijuana as an illicit industry is worth more than $100 billion in North America, so the thinking goes that growing operations stand to cash in huge thanks to legalization. Slow down Cheech, put down the Doritos and think for a minute.
Pot in Canada alone is expected to become a $10 billion a year industry, but only a small portion of that money will end up in the hands of growers. After the crop is harvested it has to be processed, then it has to be packaged, next comes distribution and then retailing. Oh, and let's not forget the tax man. All those expecting Cannabis grow ops to be gold mines, they're going to be disappointed. Some will be profitable, some.....But they'll have to manage their business well in a highly competitive environment.
It's a bubble, and as with all bubbles there are a multitude of Penny Stock promotions going on right now trying to cash in on the hype. It's no different from the Dot Com days when worthless companies put a .com at the end of a word and saw market capitalizations explode beyond anything that could reasonably be supported by financial reality, check Pets.Com for reference.