Stock Picker

Taking Stock in Pot? Beware!

Stock Picker

With medical marijuana now legal in twenty states and recreational marijuana approved in two states, some people may sniff an investment opportunity. Not so fast says the Financial Industry Regulatory Authority (FINRA), which issued this press release warning investors of marijuana stock scams--and they don't seem to be just blowing smoke.

“The con artists behind marijuana stock scams may try to entice investors with optimistic and potentially false and misleading information that in turn creates unwarranted demand for shares of small, thinly traded companies that often have little or no history of financial success. The scammers behind these pump and dump scams can then sell off their shares, leaving investors with worthless stock.”

As FINRA’s Senior Vice President for Investor Education, Gerri Walsh, so astutely put it, “Investors considering investing in a heavily touted, thinly traded company should question why a total stranger would tell them about a really great investment opportunity. In reality, there is likely no true opportunity.”

Some of the companies touted have the ticker symbols of MJNA, CBIS, and PHOT. All of them are penny stocks whose price and volume history show a classic pattern of pump and dump (think of an upside-down v).

Please forgive us for saying this, but buying high can be hazardous to your wealth. Kudos to FINRA for blowing the lid off these pot stock scams which have been springing up like weeds.  OK, OK, we’re done. Just remember, your job as an investor is to capture the returns that are offered by the market. Don’t get burned by trying to be a high roller.