Investors who own cannabis-related stocks have been on quite a ride in 2013.
As we reported last week, most publicly traded companies with ties to the marijuana industry saw their shares rocket to new highs in February only to come crashing back down to earth in March, ending the first quarter at or below where they started the year.
Two stocks bucked the trend: Medical Marijuana Inc. more than doubled during the first three months of the year, while Mediswipe rose fivefold. On the other end of the spectrum, shares of MedBox and Terra Tech saw the biggest declines, falling 58% and 73% in the first quarter, respectively.
The general volatility of cannabis stocks shouldn’t come as a surprise. This is what happens when you’re dealing with:
#1. Thinly traded “penny” stocks that are prone to huge price swings
#2. An unpredictable business climate
#3. A product that is still illegal federally
While it’s hard to predict which direction marijuana stocks will move in the second quarter, the long-term prospects for the cannabis industry are bright. Several companies could become Wall Street powerhouses in the years to come. But anyone who decides to invest in publicly traded cannabis companies should buckle up and prepare for many highs and lows along the way.
Also last week, MMJ Business Daily wrote about a new website called WeCanna that is hoping to fill the financing void in the marijuana industry. The company will offer upstart ancillary marijuana companies and entrepreneurs hoping to launch cannabis-related projects the ability to raise money directly from consumers, advocates and other individuals who want to advance the industry. The site will focus on ancillary marijuana
We think that this relatively new funding method, called crowdsourcing, could take off in the cannabis sector.
For one, entrepreneurs in this industry have very few funding options, given that banks and government organizations typically won’t lend to marijuana businesses (often even ancillary ones). Secondly, there are a lot of consumers in this industry – including patients – who are very passionate about the product, so there’s a good chance many of them will be willing to fork over a couple bucks to support companies and projects. If enough people get involved, those small donations can add up to thousands – or even tens of thousands – of dollars.
There are some relatively big challenges for crowdfunding in the cannabis space, particularly when it comes to rewarding contributors. So the future of WeCanna will ultimately depend on whether it can successfully clear these hurdles.
Other top stories last week in MMJ Business Daily: