Many people see the green of cannabis as a way to the pot of gold at the end of the rainbow. If you are going to invest in a legal (at a state level) cannabis business, you need to make sure that you know what you purchase.
The SEC recently charged a company and its founder with promoting “record” revenue numbers to investors and touting itself as a leader in the cannabis industry, all the while it generated certain of its earnings from sham transactions through a secret corporate affiliate. The company and its principal agreed to settle the charges, with the principal agreeing to pay $12 million in disgorgement and penalties and accepting a bar from serving as an officer or director of a public company or participating in any penny stocks.
So what do these events tell us? First, there are potential big rewards through investing in this burgeoning industry. Second, there are people looking to take advantage of your desire for large profits.
Investing in these businesses is fine, but make sure your eyes are wide open. Ask question, perform due diligence, and ask more questions. You don’t want to see your investment go up in smoke.