Who would have known that the legalization of marijuana would suddenly make so many people interested in securing their futures. We are getting so many “how do I buy marijuana stocks” questions that we had to write an article to answer the question aptly titled “How to Buy Marijuana Stocks for Dummies“. The common thread we noticed with all these inquiries was that the people asking didn’t seem to really care which stocks they bought, but rather they just wanted to “buy marijuana stocks”. This is a dangerous approach to take in the cannabis space right now and while we write exclusively about exciting emerging technologies, we’re going to try and dedicate one article a week to help guide all the ambitious stoners out there. If you think you’re going to retire in Mexico and smoke skunk all day on the private island you bought with your proceeds from “buying marijuana stocks”, the vast majority of you are sorely mistaken. One stock called Cannabis Science (CBIS) is a good example of what we mean.
While our last cannabis-related article told you how to buy marijuana stocks, it didn’t tell you which marijuana stocks to buy. For whatever reason, people always want to be told where to invest their money. Maybe it’s because they feel more assured by talking to some handsome young financial adviser in a Ferragamo tie who took the train in to work. or maybe it’s because they actually think someone out there knows. The truth is, no financial adviser on the face of this planet will ever tell you that you made a bad investment decision by investing in a broad market tracker fund (look it up). In other words, we told you exactly how you should invest which is to make sure that 80% of your portfolio is in safe investments like a mainstream robo advisor while the other 20% is used to “buy marijuana stocks”. We’re back to the same question again. Which marijuana stocks should I buy?
That’s the wrong question to ask. Because there are so many cannabis stock investing scams that the SEC had to issue a warning, the right question to ask here should be “which ones should I not invest in”. Our answer is simply this. You should not invest in any over-the-counter (OTC) stock unless it’s an ADR.
An ADR is when a stock that trades on a foreign stock exchange is also traded on the OTC market as an easy way for a foreign company to offer shares to U.S. based investors.
You should not buy any OTC stock that is not an ADR. Here’s why.
Marijuana Penny Stocks
We’ve written extensively about OTC scams since 2003. We’ve uncovered some of the biggest, crappiest, scummiest, company management teams you can possible think of. We’ve been physically threatened (yawn), accused of being short (we never short any stocks we discuss), invited to join in (no thanks, we’re doing just fine financially), and have been threatened with “libel lawsuits” more often than we can count (facts aren’t libel). Loyal readers know that we value our integrity more than anything and that our track record speaks for itself. We can tell you that 99% of OTC stocks are a scam. Even the SEC issued a warning about marijuana penny stocks:
An Example of a Marijuana Stock Not to Buy
We’ve given you examples before of the red flags you should be on the lookout for when looking at OTC stocks. One red flag we didn’t mention because it is obvious its barely worth repeating. Do not invest with a company whose management has been accused of stock fraud before. This is kind of like when you’re dumb enough to front a dealer who you don’t know $50 for a bag of skunk and you don’t hear from him for a week. Then you run into him outside of Taco Bell and while you’re all up in his grill, he asks you to front him $50 again and he’ll bring you back twice as much skunk. If you’re that dumb to front the guy $50 again, you deserve to have your money taken. Let’s take an OTC stock called Cannabis Science (OTCMKTS:CBIS). The CEO and co-founder is named Raymond C. Dabney, this guy:
That’s right. He’s named in a lawsuit filed by the SEC accusing him of stock price manipulation. That wasn’t his first run in with the authorities though:
So what was the outcome of the lawsuit? Read for yourself:
The final judgments permanently enjoin Raymond C. Dabney of Vancouver, British Columbia, Richard A. Dabney of Rancho Palos Verdes, California, Charles J. Smith of Reno, Nevada, and Philip M. Young of Scottsdale, Arizona, from violations of the securities registration provisions of the federal securities laws, and also enjoin Richard Dabney from violations of the antifraud provisions. The four defendants were ordered to pay more than $1.4 million in disgorgement, interest, and civil penalties. The Commission’s complaint alleged that the defendants engaged in an unregistered distribution of the securities of Alliance Transcription Services, Inc. (formerly Strategy X, Inc.) from April 2005 through September 2006 and that Alliance and its officers participated in a scheme to manipulate the price and trading volume of its stock.
Here’s a link to the above from the SEC website. Yes, that same guy who has been in trouble twice now with the authorities is now running Cannabis Science (CBIS) and he’s offering you free shares as a loyalty gift (we can’t make this stuff up). Look, if you want to speculate with this high volume issue then go right ahead. Just be aware that you shouldn’t be surprised at all if this shtick gets shut the fcuk down by the SEC. Why? It’s because of a little something we call “science by press release”.
Science by Press Release
So when you dig into the legal filing like we did, you see that these guys were accused of issuing misleading press releases that contained blatant lies. Here, take a look for yourself:
We have made an observation about OTC companies which is that they often lie from one press release to the next. This is how they keep all the bag holders (look it up) sucked in so they don’t sell. Would it be any surprise to see that Cannabis Science (OTCMKTS:CBIS) has managed to issue 66 press releases in 2016? How do you even manage to do that? That’s more than one press release a week. While we’d like to hope that none of those press releases are misleading, we’re just not willing to take a chance given this individual’s track record. Maybe this time he’s changed his ways, but we’re not going to front him money a third time hoping he doesn’t run off with it like the last two times.
So there you go. We’ve given you an example of a stock you should not buy without being perfectly willing to part with all that money you’re fronting this guy. And if you’re a current shareholder of Cannabis Science (CBIS), you ought to be scared to death right about now.
UPDATE: 1/24/2017 We filed a formal complaint to the SEC for them to investigate Cannabis Science (CBIS) on the premise that it appears to be a pump and dump scheme of the same type that has been perpetrated before by the CEO and co-founder per the contents of this article.
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