How dangerous are cannabis shares?

by Team Inc.

2018-12-4-How dangerous are cannabis stocks?

Some investors will earn millions in cannabis, but many more will lose a lot of money. Nigam Arora, founder and chief investment officer of The Arora Report, writes that down

To get rich from investing in cannabis shares, according to Arora, there is more to it than most investors think. According to him, it requires skill, knowledge and the right mindset to earn money in marijuana shares.


The investment expert quotes GW Pharmaceuticals as an example. This biopharmaceutical company scored a first by getting FDA approval for a cannabis-based drug called Epidiolex.

This epilepsy drug has the potential to generate more than $2022 billion in sales by 1. The drug is derived from cannabidiol (CBD). CBD has many medicinal properties that help against a variety of ailments. The drug contains less than 0,1% tetrahydrocannabinol (THC). THC is the substance that gets people high.

The drug is directed against Lennox-Gastaut syndrome and Dravet syndrome. Over time, GW Pharmaceuticals may receive approval for other conditions. The company also has a pipeline of other promising cannabis-based medicines.

The US Drug Enforcement Agency (DEA) has classified Epidiolex as a Schedule V regulated substance. Schedule V is the lowest class. It was generally expected that the DEA would classify it as a Schedule I drug, or the highest class. This means that the DEA has moved this cannabis-based drug to the lowest-risk category.

Race jump ...

Investors and analysts responded positively to this news. The stock made a price jump and reached new highs. The so-called 'smart money', the investment flows of hedge funds and other experts, however, pulled back from what turned out to be the top of the stock price.

… And 35% down

After the good news, the GW Pharmaceuticals share lost 35% of its value. Goldman Sachs, Morgan Stanley and JPMorgan also helped GW Pharmaceuticals with a so-called secondary share offering (SPO), or shares that are placed after an IPO. The banks sold 1,9 million shares at 158 dollars per share. Those who have purchased the secondary offer now have significant losses.

Most analysts remained positive during the fall of GW Pharmaceuticals and called for the stock to continue buying. The Arora Report's advice during the price fall was “don't buy”.

Buyout target

Arora thinks GW Pharmaceuticals could become a buyout target, especially if the results of the company's other clinical studies are positive. Ultimately, a buyout could potentially take place at a rate of more than $ 200. Despite this potential buyout, Arora is still waiting for more signals to be able to give a buy advice.

Great potential

According to Arora, the potential for cannabis is great, but investors need considerable knowledge, skills, good analysis and training to make money in the sector. The loss of value of 35% of a company with a track record and good prospects such as GW Pharmaceuticals provides proof of this. Most cannabis companies do not have such benefits.

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