Cannabis industry investors are a passionate group. Many are willing to take the risk that comes with investing in companies mostly described as speculative. Plus, the overhang of being in a federally illegal industry affects every decision an investor in this group faces.
Before committing your hard earned dollars in this group, you must ask yourself these three questions. Does the company have a real and viable business plan? Is the management professional and effective? Can the company withstand the upheaval in the marijuana market?
1. Kick the tires and do your homework before investing in a cannabis company.
Read the company’s business filings and don’t rely on just news articles to learn about a company’s business. Some news stories may be helpful, but it should not be your only source of information. If the company is public, there will be numerous documents filed on behalf of the company. Take the time to read these filings.
Ask yourself whether the company’s plan is viable and if their growth projections are realistic? Do they have a real business or it is merely a business idea? If they sell a product, how much revenue is coming in? If it isn’t much, but the projections are for double-digit or triple-digit growth, how are they getting there? Are the growth projections based on hard numbers or does it seem like guesswork? Perhaps this is a red flag
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