Okay, we are going to get a little more boing than usual for this story. Serious stoners might not give a hoot about the big picture financial stuff, and who can blame you. But, there is something to be said for taking in interest in all aspects of what you are interested in. The stock market for weed has been taking an interesting turn.
Before we start, we do want to let you know that this is not necessarily an endorsement of Capitalism. Of course, it clearly isn’t a condemnation either, just a discussion of how it works, and whether its worth your time. If you are someone who does not participate in the system, we applaud you.
With that out of the way, it is still an interesting concept, the weed stock market. It is something that isn’t even legal yet, but has taken off already. We’ll briefly touch on how this has happened, and what it means for you, an aspiring investor.
How Does Weed Work With The Stock Market?
Well, weed stocks have actually been around for years. Because medical marijuana is legal across Canada, they have had a chance to blossom and grow much like the buds themselves. They are a very diverse set of companies let by the most well known ones, Aurora Cannabis and Canopy Growth, to name just a couple.
They work just like any other publicly-traded stock out there in that sense. The more interesting perspectives factor into the fact that recently marijuana stocks have hit a major boom. With impending legalization, companies are all competing to get involved quickly and fully. Investors are lining up to throw money down the weed well.
Recently, a Canadian weed stock was added to the NASDAQ exchange for the first time. This means that Americans can get involved in a much bigger way than before. Cronos Group, an international medical marijuana company, is expecting to see big gains with this move.
Still, there are reasons to be skeptical of this boom. Companies are throwing billions of dollars into the industry and that figure only looks to get higher. Still, the government is dragging its feet on full legalization, and there isn’t an exact timetable on when it will happen. Also, there are a ton of companies getting involved all based on speculation alone, with no real evidence of how the marijuana landscape will look once legalization does occur.
Should I Invest?
This writer will readily admit that they are no expert on the stock market, so this is all speculation from here on out (not that it wasn’t before). But there is serious concern that this is a fragile bubble that could burst at any time. There are a few reasons why experts are thinking that this could be a serious bust in the near future.
1. Bubbles Always Burst
Sorry to break it to you, but this is just a fact of life. Sure, there are the Apples, and the Amazons that skyrocket then stabilize, but for every one of those, there are 1000 stories of things that blew up then dropped like lead balloons. Some stocks might fare well, but there are going to be an insane number of competitors all vying for the same piece of the pie.
The worry is that everyone is getting involved with this business with the hope that it will be big money. And while it seems like a pretty safe bet that there will be a lot of money in the weed business, it could not be what you’d expect. It is hard to track how much weed is sold illegally right now, so no one knows for sure how much the market is going to be worth. Additionally, taxes and government regulations could really slow the market growth.
2. Oversaturation is Already Happening
The stock market is already starting to show signs of becoming too full of weed. Dilution is beginning to occur in some of these businesses. Dilution means that there will be more shares than expected, which is great for the companies, but leads to shareholders having less of a stake in the company.
Another issue is that with so many companies, it is going to be hard to know which ones will be successful. Because they are all based on projections and business models with little real world testing, you may not know which company is the right one.
3. Legal Issues
This has been an issue in America forever. Weed is technically illegal through the federal government. But states are still allowed to make it legal. This means that there is a weird discrepancy between what is allowed and what isn’t.
In Canada, the issue is that we don’t know exactly what legalization will look like. Certain things we think will be legal may end up not being legal. Also, it looks like decisions of distribution will be left up to individual providences. That means even more questions about what you will be allowed to do.
The Bottom Line
Now, if you’re not scared away by these things and ready to invest, we’re not saying you shouldn’t. You may know the market better than us. There is clearly a lot of money to be made in this business. We just advise caution and research before you do anything drastic. This is very early and fluid. The market could change with a government announcement tomorrow. All we’re saying is maybe don’t put your life savings in weed stocks right away.
So, there you go, a brief analysis of the weed stock market boom. Good luck, prospective investors. We may not have the guts to get involved in something so volatile, but if you do, we wish you the best. Until next time, stay stoned!