Top 5 Pot Stock Moments of 2014

By Emily Fata

2014 was a monumental year for the cannabis industry. Pro-cannabis legislation efforts were passed in Oregon and Alaska; recreational sales began in Colorado and Washington; and President Obama released a sound bite hinting at the need for cannabis policy reform. But these positive macro strides did not necessarily equate to success for pot stock investors. For better or worse, here were five big moments for pot stocks in 2014: the good, the bad, the precedent-setting and the cringe-worthy.

 

1. Recreational markets open in Colorado.

January 1, 2014, marked the start of recreational cannabis sales in Colorado; dispensary lines were out the door and investors were hungry to capitalize on the industry.

Demand for marijuana stocks was unprecedented in the first quarter of 2014—the Viridian Cannabis Stock Index, comprised of 70 publicly traded cannabis companies, rose by 838.4%. Companies categorized in the consulting, biotechnology, and infused products sectors saw the highest returns among investors, but any company issuing press releases loosely related to marijuana was on the upswing.

 

2. The SEC suspends five pot stocks.

By the beginning of Q2, investors had already begun questioning the legitimacy of many public companies benefiting from the hype around cannabis markets. In May, the SEC suspended trading for five publicly traded cannabis companies, including Cannabusiness Group, GrowLife, Inc., and Advanced Cannabis Solutions, Inc., due to questions regarding the “accuracy and adequacy” of public information provided by the companies.

While some of these businesses worked to regain investor faith, others just confirmed the SEC’s claims of their fraudulent business activity. The CEO of GrowLife, Sterling Scott, resigned from the company shortly after the suspension for “personal reasons.” Public records show he sold 5.7 million shares of GrowLife for $2.9 million on April 9, shortly before the SEC suspension.

 

3. Terra Tech gains preliminary approval from Nevada and the SEC to distribute marijuana.

Terra Tech Corp. (OTCBB: TRTC) could potentially be the first publicly traded company to distribute marijuana. In December, CEO Derek Peterson disclosed in an interview that Terra Tech had received approval from the SEC to use recently raised capital to build and operate medical marijuana operations under its subsidiary, MediFarm. (Terra Tech raised $6.5MM  from Dominion Capital, New York-based private equity firm, earlier this year.) MediFarm has already received provisional certifications from Nevada to own and operate four dispensaries and two cultivation facilities in the state.

Whether Terra Tech will be the first publicly traded company to distribute marijuana is still unknown. But its early-stage discussions with the SEC may set a precedent and encourage other cultivators and dispensaries to raise capital through public markets.

 

4. Medbox, Inc., announces it will restate five quarters of financial statements.

At the end of December, Medbox announced its need to amend and restate its financial statements for the past five quarters, on accounts of reporting revenue prematurely. To make matters worse, Medbox, which sells medical marijuana vending machines, is also being investigated for possible violations of federal securities laws.

While the news is not necessarily surprising, the timing is making investors cringe. Pot stocks had begun to make a recovery in Q4 as the successful November elections seemed to overshadow the SEC’s warnings of fraudulent investor activity. Medbox’s announcement does not reflect well on reporting standards for the marijuana industry and reminds investors to tread with caution when considering an investment in any marijuana stock.

 

5. Novartis enters marijuana markets

In April, GW Pharma (GWPH) coupled forces with global pharmaceutical giant Novartis (NVS) to commercialize Sativex in Australia, New Zealand, Asia, the Middle East and Africa. Novartis has acquired a 5% stake in the company in exchange for $5MM, with an option to acquire an additional 5% over time. While this event didn’t necessarily move the marijuana markets (other than bumping up GWPH’s stock prices), it foreshadows Big Pharma’s interest in the marijuana market and acquisition trends that might emerge in 2015.

 

Guest Contributor designates a writer who is guest publishing content with MJINews.

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