The Cannabis market is “off to a dull start” in 2015, says Alan Brochstein, founder and CFO of the marijuana investment group 420 Investor.
This time last year there was tremendous excitement and optimism around Colorado unveiling its recreational marijuana market, and as the first quarter of 2014 advanced, “the stocks went crazy,” says Brochstein. “On average they went up six or seven fold, some of them twenty times.”
Yet despite several states reforming their marijuana policy in the recent elections, 2015 is not progressing with nearly the same economic vigor as 2014. “There was a slight pop in the beginning of 2015, but then prices sunk back down to where they started.” Brochstein believes a lot of this had to do with poor management of companies that rose too quickly too fast. Similar to the .com and solar industries, money was being poured into companies that weren’t equipped to operate on that level. Which lead to more scrutiny from the federal government.
“Last year the SEC started to clamp-down on this sector, and singled out around eleven stocks that started small and then got huge, some of them that were really significant and put a big damper on the market.”
Brochstein says that this frightened some investors away from marijuana stocks and triggered a plunge in prices. Many stocks were traded at far more than they were worth, Brochstein argues, and what you were getting was often not a great deal for what you were paying. He believes that while there are competent, honest, legitimately funded businessmen in the marijuana industry, the market is loaded with companies that do not meet the standards of a safe investment.
Though as the industry grows, the market has begun to cleanse itself of some of the more dead-end stocks, which will potentially reinstate investor confidence in marijuana. Brochstein is optimistic about the market impact of Oregon’s recreational industry in 2016, as well as California’s potential legalization in 2016. Yet those are still a ways down the line, and he knows that we’re most likely not going to see another year for marijuana stocks like 2014 for a while.
“You can’t always tell people, ‘you have to invest in this sector, things are gonna be great!’” Brochstein admits. “I think 2015 will be a year of stability.”
Photo Credit: OTA Photos