Is It True About a Windfall in Cannabis Penny Stocks? Readers Ask Natalie.
January 31, 2017
Hi Natalie! I've been seeing all kinds of articles and info on Facebook today about putting $50 into the cannabis industry TODAY, before Feb. 1st and making enormous profits. Is this true? I would love to know what Natalie has to say about this! I'm sure there are many others who would like to know what's happening on this front as well! Thank you for your time.
Signed: High on Pot Gains
I found the Agora Financial Facebook ad that you are referring to. I’m linking to it here. We’ll see how long this link stays live.
Since today is Jan. 31, 2017 and you have to respond by tomorrow, I’m turning this around as quickly as I can, in hopes of saving you $50 or an arm and a leg. Really this response should be: Lies and the Lying Liars Who Tell Them.
One of the fantastic examples of massive gains of over 2000% listed in the Agora Financial ad -- Fusion Pharma – is a company that was accused of fraud and deceiving investors by the SEC and the Department of Justice on Sept. 16, 2016. Shares are frozen; the owners have been fined and are facing jail time. Another, Novus Acquisition, has no financial information available. The Novus CEO Gary Labrozzi had trouble with the SEC a decade ago with his former company Brandmakers. The sad thing is that those people who are not reading this blog could be on the losing end of fraudulent investments, if they are not careful. Keep reading to learn more about how to avoid these types of scams.
Here are 5 Tips That You’re Looking at a Scam, so that you can ID crooks in seconds next time. The thing about scams is that taking the $50 bait is only the beginning. The deeper you dive into the trap, the more it will cost you. Sometimes that’s thousands of dollars. Sometimes, it can bankrupt you.
What About Pot in General?
See my comments on the cannabis industry directly below the 5 Tips.
5 Tips You’re Looking at a Scam
1. You have to respond within 24 hours or miss the opportunity.
No extra elucidation needed on this one. It’s classic pump-and-dump strategy. Experienced, successful investors know that investments are like a 100-piece puzzle. The more you know, the more likely you are to make great gains. The less you know, the more likely you are to be taken advantage of.
2. The charts and data are dated.
The Facebook ad shows a sexy chart of Abattis Bioceuticals Corp rising above $2.00/share and posting 9000% gains! If you look closely at the chart, you'll see that it is from 2014, and covers only a 3-month period. If you click over to Google Finance, you can access a 5-year chart, showing Abattis at the price it currently trades at – 10 cents. Most investors who bought Abattis have lost a ton of money. It is very likely that the only people who made any money at all were the insiders who were pumping and dumping the stock in March of 2014.
3. There aren’t any real testimonials.
Agora Financial claims that “Agora Financial editors’ consistent ability to stay ahead of the mainstream has earned recognition from dozens of media sources, including The Wall Street Journal, The Economist, Financial Times and others. The link to the proof of this claim is broken. There is no one lending their name to a testimonial. That’s a pretty big red flag.
4. The executives and owners of the business are hidden.
So, who owns Agora Financial? How long have they been in business? Is the company profitable? You can see a list of “editors,” but the About Us page is extremely vague about who runs the show. If you invest in a publicly traded company, you’ll see who the executives are and even be able to see how profitable the company is. The more transparent the company is, the more likely it is on the up-and-up. The harder it is to find even basic information, the more there is to hide.
5. There is a long list of complaints on the company.
Agora Financial has a long list of complaints filed with the SEC. Click to read. A simple Google search will reveal warnings from former subscribers. As I mentioned, the owners of Fusion Pharma have been charged with fraud by the SEC and the US Department of Justice. While I didn’t conduct a forensic dive into each of the massive wins outlined in the Agora ad, two out of three that I did look at had obvious problems and the third was rife with red flags. Show me your friends and I’ll tell you who you are.
What About Pot Penny Stocks in General?
Penny stocks are companies that aren’t making the grade to trade on the big boards yet. They are highly susceptible to pump-and-dump schemes and are often thinly traded, meaning that if you buy them, you might not be able to sell them – ever. (Meaning any gains you think you’ve made are really worthless.) If you’re interested in investing in a penny stock, it’s more like a 1000-piece puzzle that you need to put together before plunking down the dough. Novices should just avoid penny stocks altogether.
One other thing to keep in mind is that this is an industry that has been run by the underground for decades (by “crooks”), and is still illegal in most states. Yes, it’s a massive industry. However, we are still pretty far away from bringing the pot industry completely out in the open, with transparent business practices, no jail time and no extra legal costs. Even opening up a bank account can be difficult for a pot business.
There is at least one pot stock that is traded on the big boards – GW Pharmaceuticals. GW Pharma is developing cannabis drugs for the treatment of epilepsy, cancer and pain. However, GWPH sales dropped almost 70% year over year, and the company lost $80 million in 2016 (on $13 million in sales). The stock is trading near its all-time high, but this has more to do with hot air than fundamentals.
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