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07 Oct #Cannabis Stock Woes

We’ve discussed the risks and recent opportunities inherent in marijuana reverse takeovers before. Today’s report of wild-swings in the Mary Jane market come from HotStocked who reported a precipitous decline in Vapor Group, Inc. Yesterday the stock dropped 24% most likely on concerns of dilution. The number of common shares outstanding has increased tremendously since the company company performed a reverse merger earlier this year:

The company was sitting at 270 million outstanding common shares in mid-January. As of mid-August that number was up to 343 million. With a late July 8-K filing VPOR did lower its authorized shares to 1 billion, from a previous 2 billion, which is some indication that the company is trying to deal with the situation and does not intend to dilute to kingdom come.

VPOR is one of many cannabis/marijuana reverse mergers that has taken place recently. Certainly a bubble in this area IMO. Where there is risk, there is opportunity, but this sector is an area that we’ve stayed out of for a number of reasons, only one of which is the wild swings in the price of stocks. Regardless of personal opinion in this space, it will be interesting to see who will survive the fray and consolidation. Vapor Group and others may yet have a chance if they can only get dilution and profitability under tighter control.

Both FINRA and the SEC have issued warnings specifically about Marijuana Stocks.

 

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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.