CSA Warn About Medical Marijuana Stocks

By Andrew Rickard | June 20 2014 11:15AM

New regulations that took effect April 1 this year made it legal for companies to grow and sell medical marijuana, and the Canadian Securities Administrators (CSA) note that a significant number of reporting issuers have announced plans to enter the business.

The industry is being touted as a hot new sector for investment, and number of small or inactive firms have announced business plans and begun to raise capital. "In many of these cases, just the announcement of intent to develop a medical marijuana business has resulted in an immediate rise in a company's stock price," warn the CSA, who are concerned that investors could face financial harm "by purchasing such shares at an inflated price before there is a viable business".

Regulators are reminding investors that it is both expensive and time consuming to obtain a licence to enter the medical marijuana business, and the companies that have done so are listed at "There is no assurance that a company announcing its intent to enter the medical marijuana industry will be successful in obtaining a licence, or in creating shareholder value," explain the CSA.

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