Interest in companies that are involved with marijuana has exploded, especially now that a legalization initiative has qualified for the November ballot in California. This column takes a look at the opportunities and pitfalls. by Steve Kubby
(libertarian)
Thursday, June 17, 2010
All the medical marijuana attorneys I know tell me thay are flooded with requests for investing in or starting a medical marijuana dispensary. It is clear that a frenzy of investors are chasing a booming world of marijuana investments. What is not so clear is that much of what is being promoted as golden opportunities, is largely smoke and mirrors.
For example, why anyone would want to invest in a business that is required to pay taxes, but remain non-profit and subject to violent raids by police is beyond me. However, the fact is that investors are throwing money at anything that remotely resembles a dispensary, regardless of legal consequences. Meanwhile, web sites like MarijuanaStocks.com and Cannabis Investments are cropping up to help serve an exploding appetite to invest in publicly traded companies involved with marijuana.
In the last California Gold Rush, it wasn't the miners who made the big money. Instead, it was the suppliers to the miners who made fortunes. Today, we can see the same economics playing out with growers and hydroponic stores. Most growers are just breaking even and getting their mortgage paid. And contrary to public perception, most medical marijuana dispensaries are just breaking even. In contrast, most hydro stores are experiencing a booming business. So if you're looking for a successful business, with the greatest potential for short term growth, forget dispensaries and go with hydroponic stores.
But that's just not sexy enough for some investors. They want the action of watching their stock perform each day against other stocks. With this in mind, I formed the second publicly traded company, Cannabis Science (CBIS), about a week after the formation of Medical Marijuana, Inc. Since then a third publicly traded company, Cannabis Medical Solutions, Inc. (CMSI.OB), has joined the party.
As an early player in this emerging market, I know where the bodies are buried and what's really going on in this business. Here's my take away for you. Be cautious, very cautious about all of the investments, because they almost always aren't what the claim to be.
One sees a lot of financial accounting services for dispensaries being promoted these days and I would generally advise you to steer clear. As Jim Rogers, the former partner to George Soros, has observed, the future is in real products and commodities, not in financial services.
Last year my team and I resigned from Cannabis Science and started a new private company call Kubby Patents and Licenses (KPAL). Frankly, we think public companies are dinosaurs that are too big and expensive to operate. We took a second look at the reality of what was happening in this business and decided to downsize and just focus on securing patents and licensing for effective, nontoxic cannabis medicines like our cannabis lozenge.
We've developed a unique, fast-acting lozenge that delivers relief in an average of 15 minutes. And unlike all other oral preparations, our proprietary strain doesn't make you sleepy or impaired. Our unique lozenge is now protected by three patents, with "patent pending" status already secured and documented. Furthermore, we have our own team of experts who have taken countless new drugs through the FDA approval process, so we have a precise idea of exactly what we need to do to become approved for human trials.
In February of 2007, a British Company, called GW Pharmaceutical signed a deal with Otsuka Pharmaceuticals for $18 million cash and $273 million in payouts. Those prices were in British Pound Sterling and was worth nearly twice that amount in US dollars. Considering that a successful new FDA approved drug typically generates $50 billion over a ten year period, Big Pharma is happy to make a 100 to 1 gamble on buying rights to any drug approved for human trials. Our KPAL business plan calls for us to be approved for human trials in two years and we believe we can sign a similar deal with a major pharmaceutical company . Although we're only allowing friends to invest in our little company right now, this is the kind of business model you should be looking for.
There is certainly a lot of money to be made in the emerging market for cannabis medicines. However, before you invest in any cannabis company or marijuana stock, I urge you to do your due diligence. I also recommend you read this eye-opening commentary by Thomas Knapp.
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Posted By: ICEQUITY
Date: June 18, 2010 07:10:33 PM
How ethical was their behavior?
"ethical"
"that branch of philosophy dealing with values relating to human conduct, with respect to the rightness and wrongness of certain actions and to the goodness and badness of the motives and ends of such actions."
"ethos"
"the fundamental character or spirit of a culture; the underlying sentiment that informs the beliefs, customs, or practices of a group or society."
Posted By: futurestrader
Date: November 29, 2010 07:06:59 PM
There's a world world brewing and it won't be fought bombs - it will fought with economics. We will soon find ourselves in an import/export crisis. A commodities nightmare. Even though Marijuana is illegal it is already the biggest cash crop in the U.S. The myriad uses of hemp are as great as corn yet we can't get beyond the "drug" issue. It's insane. I predict that within 10 years we will have no choice but to embrace this incredible source of revenue on a massive agricultural scale. It can and will be the biggest industry in the United States sooner than later. I want to know others opinion regarding investment opportunities in Marijuana as an agricultural product. The medical marijuana industry is cool but small beans - and I don't smoke beans.
All the medical marijuana attorneys I know tell me thay are flooded with requests for investing in or starting a medical marijuana dispensary. It is clear that a frenzy of investors are chasing a booming world of marijuana investments. What is not so clear is that much of what is being promoted as golden opportunities, is largely smoke and mirrors.