It was an interesting week for medical marijuana stocks, to say the least.
Two of the most well-known publicly traded cannabis companies saw their shares fluctuate wildly, taking investors on a roller coaster ride along the way.
Shares of Medical Marijuana Inc. (MJNA) rose 35% last Monday over their closing price the previous week. They then plummeted on Tuesday, dipping as much as 92% at one point before closing the day down 30%. The stock stabilized and finished the week at 16 cents, about 6% lower vs. the previous week but up 33% from its average (12 cents) over the past month.
It’s enough to make any investor’s head spin. Although MMJ stocks are known for volatility, that’s a lot of movement in both directions in a very short period of time.
The huge swings were largely tied to the release of the company’s second-quarter earnings on Tuesday. Although Medical Marijuana Inc.’s revenues and net income rose, most of the increase was tied to an installment payment from a previous deal. A column on the site SeekingAlpha that raised concerns with the company’s near-term fundamentals – while simultaneously expressing optimism over its long-term potential – likely contributed to the stock’s extreme fluctuations. Outside factors, including recent comments by respected CNN medical correspondent Dr. Sanjay Gupta and US Attorney General Eric Holder that fueled optimism about the future of MMJ, might also have played a role in the increase early in the week.
Another company in the cannabis space – equipment provider and consulting firm MedBox (MDBX) – soared as much as 67% over its close the previous week, hitting $41 a share in intraday trading on Wednesday. The shares retreated slightly but finished the week up 50%. MedBox benefited from increased publicity – its CEO appeared on Bloomberg TV – as well as the Gupta and Holder developments. On Friday, the stock received a slight boost after the company announced it has entered into a multi-state consulting deal with another publicly traded firm, The X-Change Corp. (which didn’t see any impact on its stock from the deal).
As these two stocks show, investing in publicly traded medical marijuana companies is not for the faint of heart.
Also last week, the governor of Oregon officially signed a bill that legalizes dispensaries, while Delaware’s governor announced that he will try to revive the state’s medical marijuana program and pave the way for the launch of one medical marijuana center. These developments are part of a larger trend in which more states are exploring ways to create a regulated system for distributing cannabis to patients, which in turn benefits the MMJ business community by creating a fair playing field, concrete rules and overall stability.
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