CANNAINVESTOR Magazine June 2016 - Page 49

EVEN WEEDS HAVE ENEMIES! As Easely wrote in in the April 2016 premier issue of CANNAINVESTOR Magazine, “investing in the Cannabis Industry is fraught with risk” mirroring the cautionary words from that 2014 article so at least in all of this Ecoforming and political uncertainty that there is indeed one constant in this industry – uncertainty and risk. How can so many companies that were first-market movers in a soon to be multi billion-dollar industry be struggling financially? Too much too fast? Up against an estimated $50 billion black market? Too many small companies and therefore economies of scale have not been realized? The successful Retail Investor can reduce risks by: 1. Always referring to and following the article by Easely/HOW TO AVOID COMMON PITFALLS AND EVALUATE CANNABIS STOCKS FOR INVESTMENT 2. Check SEDAR and other filings regularly. 3. Subscribe to industry, sector, and company news feeds 4. Review bullboards and blogs for what seems to be genuine information (but take great caution). 5. Be prepared for wild fluctuations in share price; M&A activity; change in markets and products; and shocks to the landscape such as the NASDAQ ruling against MassRoots. 6. If it looks to good to be true … it probably is! Watch out for these tell tale signs: - Hype through press releases - Lots of promises but nothing being produced - Private placement after private placement causing dilution and low share prices with the proceeds used for day to day operations rather than for investment and growth. - There are few barriers to entry in some jurisdictions and It is not too onerous to crowdfund some seed money and file an application for a licence and pronounce the company as the latest start up. 7. Accept there are factors outside of your control such as the impact of taxes on demand and black market competition whether on price and/or product AS well as rulings and even statements made by those in power. 8. Being the first to buy the shares of a new company as it hits the market may not always be the best move for the Retail Investor as Retail Traders create price volatility. For example, Canopy Growth Corporation is a front runner in the industry and picked by many to be one of the top two in the Canadian market yet was recently the 4th most shorted stock on its Canadian exchange. 49