What Is The Marijuana Industry?
As Canada and jurisdictions in the U.S.A. have reviewed and updated laws related to the use and sale of marijuana, an emerging market has gained momentum and built excitement amongst investors hoping to cash in on “the next big thing”. However, as with all evolving business models and legislation, investors should be aware of the potential risks, including those noted below.
Things to Consider
As with any emerging market accompanied by significant speculation and excitement, there are a number of risks that should be carefully considered before investing. The following are especially true for the growing marijuana industry.
No guarantee of success: With many rules and regulations still in flux, many companies’ forecasts of success may only be hopeful speculation.
Government and legal considerations: Many jurisdictions are still determining their laws about where marijuana can be sold and if it can be advertised – decisions on these issues may ultimately decrease the value of an investment.
Investing in American companies: While the sale and distribution of marijuana is legal in some states, it is still illegal under federal law. Should the federal authorities choose to enforce the law, it could put the money of investors at risk.
High operating costs and share dilution: The costs of developing and operating a commercial marijuana company are surprisingly high. As the costs add up, a company may choose to raise capital by issuing additional shares, thereby possibly decreasing the value of the shares held by original investors.