Every time an investor buys shares of a company’s stock that company is then indebted to that investor. If a company is issuing shares it is looking for money to help the company expand or pay other debts. Outstanding shares could mean many things but none of them point towards anything terribly positive for the immediate share price. The cannabis industry is a booming industry so companies have the potential of being flush with cash from consumers of their product rather than needing to borrow from others. Signs of strong indebtedness show that there is a lack of financial foundation supporting a company. Do you think it makes sense for cannabis companies to have a lot of debt?
While the legal marijuana industry offers investors a lot of attractive investment opportunities, it also offers a lot of risk.
Investors must be selective if they want to capitalize on this burgeoning industry and focus on companies that are executing on business initiatives, well capitalized, and led by a management that is focused on creating value for company shareholders.
Yesterday, we highlighted Terra Tech (TRTC) as a stock to be careful with as insiders and management (including the CEO and CFO) have been selling stock while claiming that the company is in the middle of a major turnaround.
When investors are looking at marijuana stocks as an investment opportunity, it is important to analyze the company’s structure. We especially recommend considering the number of shares outstanding and authorized.
Today, we want to highlight another company that we believe investors need to be cautious with. The company, Rocky Mountain High Beverages (RMHB) is a company that we have been on the sidelines with for a long time and we remain cautious at current levels.
Yesterday, Rocky Mountain High Brands saw its shares plunge more than 23% after announcing that it was increasing the number of authorized shares to 4 billion.
The company’s President and CEO Michael Welch said this increase was done to accommodate equity financing, to provide capacity for acquisition opportunities, and to provide RMHB flexibility well into the future.
We remain on the sidelines and cautious with RMHB after yesterday’s move lower and will monitor how the shares trade from here. The shares rallied well off its lows yesterday and RMHB was down more than 38% at one point (traded as low as $0.017).
Over the last few years, the marijuana industry has seen incredible growth and this has led to a significant increase in the number of investment opportunities available. While we are favorable on this growth, investors need to be careful and focus on companies that are positioned to be leaders for years to come.
We want to help investors focus on some of the best positioned cannabis stocks and have listed 13 stocks that we are favorable on over the long-term: GW Pharmaceuticals (GWPH), Canopy Growth (WEED.TO) (TWMJF), OrganiGram (OGI.V) (OGRMF), Emblem Corp. (EMC.V) (EMMBF), Kush Bottles (KSHB), Aphria (APH.TO) (APHQF), Aurora Cannabis (ACB.TO) (ACBFF), Reliq Health Technologies (RHT.V) (RQHTF), Isodiol International (ISOLF) (ISOL.CN), CannTrust (TRST.CN), Invictus MD Strategies (IMH.V) (IVITF), Lexaria Bioscience (LXRP), and Cannimed Therapeutics (CMED.TO) (CMMDF)