By Charles Roques
Cannabis users are varied and sundry but tend to share some traits, such as being a little laid back, having similar responses to humor, music or culinary preferences. They might embrace notions of sharing and idealism or even pacifism. Some may be attracted to investment in the cannabis sector for similar idealistic reasons.
Stoners, or cannabis users, the more respectable term nowadays, might be investing in a product not only for its potential financial reward but also its potential contribution to medical and behavioral research. This can imbue this product and sector with an aura of a new-age, changing world. We are happy that serious research is finally letting the world know that this is a valuable and life-changing plant. We like to read about groundbreaking companies looking to the future.
But alas, a more mundane use for that same rhetoric and high-minded language is for great profit from selling products related to this wonder plant. It is nothing more than a sales pitch using grand promises and speculation.
The lack of transparency in the OTC markets can be very frustrating for new investors in the cannabis sector. It has several levels on which the companies trade and some have to disclose more information than others, but vital financial information is difficult to access in general. Promotions by companies are sometimes the only thing you have until more concrete data is available. But if the promos by these companies are always so positive and encouraging, why are their share prices dropping? Something doesn’t seem to make sense.
The marketers, companies, PR firms and paid analysts all churn out press releases but not at the same rate. Some do only a few, but others do enough for all the rest combined. Although tedious at times, ignoring press releases would not be a good idea. Keeping a perspective on their actual importance would be. Objective updates about progress should not be platforms for creative writing. Language can be revealing if you take time to think about what is actually being said so watch for signs. Below are some examples of a few things to watch for.
Repeated and recycled information? How many times can they say the same thing? One company released five releases with the identical same content reworded each time. Often they are repeated precisely for an anticipated effect on the share price. Don’t confuse the repetition for an indication of progress.
Grand promises? Mission statements have to be taken lightly. One company’s mission statement includes “dedicated to the renewal of the American economy.” Really? That’s quite a mission. It might be better to dedicate that energy into renewing the actual company since the share price is at a record low and still falling.
Poetic license? Another recently announced that it had “…successfully completed its due diligence process on an acquisition target that is expected to bring millions of dollars of revenue to the company.” That translates to roughly, “We finally finished our homework on a company we were thinking about buying that might make us lots of money.” In other words, the company doesn’t own it and it isn’t a sound reason to buy shares, and not really newsworthy either.
Success by association? Be wary of the name droppers. Even though they have no real news to report, one company includes larger issues about the industry and the names of other companies in most of their releases. Constantly reminding you about who they associate with is not a good reason for investing. Even though it is difficult to find them, the sector has cleaned up some and there are a few companies who are paying down their debt, expanding and increasing their client base without having to remind you about their friends.
Padding the resume? Board members and their experience can be important for a company’s survival. Investors like to see competent people making decisions but a long resume is not necessarily a truthful one. A press release announcing a new board member at one company recently touted him as having been awarded the Presidential Medal of Merit by a former President of the United States. The only medal close to that is the Presidential Medal for Merit that was last awarded in 1952. And why would the board member not name the President who awarded him the medal? We all forget things so maybe he was just too young to remember, since according to public records he is 65 years old, which means he received that when he was only 3 years old. Wow! No wonder they added him to the board.
Like what they are saying? Make sure it makes sense.