MedBox Inc. – which makes automated cannabis dispensing machines for MMJ centers – saw its stock price rocket by nearly 6,000% in the past week. Yes, you read that right: Nearly 6,000%, or more than $200.
The California-based company’s shares (which trade under the symbol MDBX) closed yesterday at $205, up from around $3 just before the elections. Its market cap hit a whopping $2.26 billion vs. $33 million early last week.
Chalk it up to several factors, including an article on MarketWatch featuring the company prominently and increased investor interest in the MMJ industry spurred by the legalization of cannabis in Colorado and Washington.
Just as importantly, MedBox has a relatively small number of outstanding shares (less than 2 million) available for public trading, which is also called float. Companies with a small float can see wild swings in share prices in a relatively short period of time. In MedBox’s case, investors are clamoring for a limited number of available shares, which has driven up the price of those shares (think supply and demand).
These types of swings are common with lightly traded stocks on the over-the-counter market. But it’s somewhat rare to see a publicly traded stock rise to this degree, this quickly.
While the share spike is certainly a positive development, investors who want to get in on the action right now might want to wait a bit: The stock won’t remain at these levels for long given the potential for volatility. In fact, MedBox shares are down $100 (or 50%) in early-morning trading today. The company also plans to issue more public shares to meet demand, which will likely drive the price lower – and therefore make it more affordable for average investors.
“Clearly there is a large interest in our stock and very little float to address demand,” Bruce Bedrick, CEO of Medbox, said in an email. “When this occurs market fundamentals take over and send the price soaring. So while everyone thinks this is exciting we urge our stock holders to have patience and understanding of market conditions.”
MedBox appears to have a bright future, even if its stock price comes back to earth in the coming days. The company recently reported solid revenue growth and is quickly becoming a leader in the MMJ industry. It’s also expanding into other industries, giving it a diversified market base.
“Our Medbox technology and line of products will create enormous value for retail pharmacies, hospice centers, prisons and other verticals,” Bedrick said. “So, while we are committed to leading in the emerging MMJ industry, our corporate footprint is unique. We are one of the few or perhaps the one company that has applications beyond MMJ.”