By Charles Roques
CEOs run companies, nominally at least, but if you are an investor, especially one who has cannabis shares on the OTC Markets, it would be wise to remember that the acronym can also mean chief executive optimist.
If you are holding shares of a cannabis company, positive news about the company’s progress and products are always welcome, but don’t confuse optimism for good news. You need relevant information to make investment decisions, not enthusiasm. Even negative news, albeit unwelcome, is still important to an investor so you can make a decision to withdraw or reinvest.
Paid promotors may or may not provide the information we need to make smart investments. We like to think that statements by CEOs will give us more clarity since they should know the inner workings of the companies they manage. They may, but do they actually share the important data?
Extraneous factors keep the share price low in this uncertain market for the time being, but there are others that companies are responsible for addressing. Are there any actual sales figures or production numbers? CEOs have a position of responsibility to not only understand the inner workings of their public companies but also to communicate this knowledge to their shareholders. This information doesn’t need to be encyclopedic or exaggerated, just specific and timely. The good ones may not need to constantly remind you of their promises because they issue timely, concise reports.
Pep talks are another story altogether. They may get the adrenalin going and keep us excited, but companies can’t run on adrenalin; however, it appears that way sometimes in the cannabis sector. Some CEOs can sound more like cheerleaders, but vowing to win the game doesn’t mean you will. Here are some things to watch for that should help you distinguish the pep talk from the progress report.
Does the CEO have an unrealistic ambition or a realistic perspective? How about the company that is “ … focused on persuading governments and individuals across the world to expand their preventive and therapeutic actions against cancer and other critical ailments”? The aforementioned is ambitious for a small company with little international influence.
Companies can’t run on intentions either. One company recently announced that it has taken a giant leap toward its stated goal of licensing its brand to producers of various cannabis products. “It was the natural step … Colorado is projected to hit $900,000,000 in combined medical and recreational sales this year. We fully intend to represent a piece of that market.”
Meanwhile, lack of transparency still plagues this industry. Some CEOs might prefer for it to stay that way, but they also realize that some questions have to be answered. Some may try to be vague in hopes that non-specific data will be sufficient to quell shareholders’ fears, but words like “various” and “many” are not quantifiable adjectives.
“We have and are releasing many diverse products for many different disorders that reflect the particular circumstances of each self-medicating patient. We will be releasing various products, with varying dosages and delivery methodologies, in various jurisdictions as regulatory stipulations permit. We look forward to releasing more information about additional products and locations as the information becomes available.” If you find yourself scratching your head about a CEO’s statement, then think twice before investing.
CEOs also shouldn’t guarantee future earnings. One CEO recently claimed, “The Note holder was so impressed by the Las Vegas lab, and more so by the amount of growers that have committed to exclusively test with [our company] that he was comfortable to be paid back from the revenue and earnings that will be generated from the lab.” Will be generated?
Another company has recently boasted about what it will earn once it completes a processing facility. “The infrastructure, now being put in place, will also have an astounding effect on the economy, all due to the revival of industrial hemp … . We expect it to produce millions of dollars in revenue a year … .”
However, in spite of pie-in-the-sky talk, it just might be the most interesting time to become involved and consider investing in the legal cannabis industry. The share price is inexpensive, but beware of the trade-off—the potential for unreliable information. And while optimism for the future of this industry can be a good trait in a CEO, cautious pessimism may be a better trait for the cannabis investor.