“There are a lot of people looking to drop a couple of million dollars in this sector right now.”
ArcView Group CEO Troy Dayton was sitting outside the Cannabis Capital Summit in Denver on May 29 when he started talking hard numbers — in the millions of dollars. I’ll write up the full interview with Dayton next week — as ArcView is a well-known San Francisco angel-investment firm whose members fund cannabis-related projects and businesses — but for now we have this teaser, specifically angled at those of you who are looking to invest in cannabis.
Of course most of us don’t have $2 million to invest. So what if we want to invest $5,000-$50,000 — what advice does Dayton have to offer?
“Stay away from the penny stocks,” Dayton told The Cannabist.
Penny stocks trade for $1 or less (often costing less than a cent per share) and are known for their erratic behavior. Some players cash in big-time on the stocks. Others lose their shirts when these stocks have their trading suspended by the SEC — or worse, disappear.
“If you are going to play in the public markets or with any of the penny stocks, do a lot of research on these companies. Most of them are complete BS. There are some legitimate companies. They’re overvalued at the moment, but that’s not uncommon. There’s still a way to win with overvalued companies because there’s a lot of exuberance.
“But be careful. I watch a lot of people blow a lot of money on companies that are press release writers — they’re not businesses.
“It’s a very unfortunate thing about the way U.S. investing works: In order to invest in companies, you have to be an accredited investor. Meaning: Only rich people can invest in private companies. It’s absurd. It’s a terrible law. And there are some changes coming to that in the next six months to a year, and we will start to see some changes that will allow the non-accredited investor to be able to invest in private companies.
“But until that happens, buyer beware.”
Dayton then caught himself. Penny stocks have their dangers, but he also embraces anybody who is excited about investing in cannabis.
“And also, welcome! There’s a reason why people are so excited about this industry. It’s something that they believe in. They want to have a piece of the next great American industry. It’s a wonderful impulse. And they’re rationally exuberant.
“What they do with that rational exuberance is a whole other question. People go on, open their E*Trade account and start buying anything with cannabis in it — or anything they’ve seen in the news. And that’s dangerous.”