Canada’s securities regulators on Monday warned the public about the risk of buying shares in companies that claim to be involved in the medical marijuana industry.
The Canadian Securities Administrators said that a considerable number of listed firms have expressed desire to venture into growing and selling medical marijuana after the government approved new laws governing the sector that took effect on April 1, reported the Huffington Post.
CSA issued the rare joint investor alert, warning investors to exercise caution when mulling whether to invest in medical marijuana shares. The U.S. Securities and Exchange Commission also released a similar caveat, and went as far as naming specific companies.
Currently, only one government-licensed company is publicly listed out of the 20 companies that have been awarded the licenses, though several small mining firms and shell companies saw their shares surge after expressing desire to join the industry.
“This is an issue that we decided needed to be addressed.… There’s a lot of news and a lot of focus on the sector right now, so that’s why it has been brought forward,” said Mark Dickey of the Alberta Securities Commission. “We had observed that just the announcement of somebody about to develop a medical marijuana business could result in a stock jumping and there would be no basis for that.”
Investors have focused their lens on the fledgling sector, which is estimated to be valued nearly $1.3 billion in the next decade, ever since Health Canada approved a new set of laws that authorized a few companies to deal with medical marijuana on April 1.
So far, over 600 applicants are waiting to be approved to join the industry, which the government estimates will have 50 companies in the next 10 years. Some quarters believe that the industry may be building a speculative bubble that may burst soon. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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