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Why Weed Stocks Only Trade OTC

By  +Follow January 16, 2014 9:00AM
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Equities.com invites you to watch Legalized: Making Sense of the Marijuana Green Rush our ground-breaking roundtable discussion on the impact of recreational marijuana's legalization in the United States. Our amazing panel of leading experts offer incredible insights from their perspectives of the regulatory, legislative, medical and business aspects of the industry. Click here to watch now.

 

Traders who have followed marijuana stocks over the past several weeks have witnessed some of the most incredible, volatile trading in recent memory. Weed stocks rise and fall in the mid to high double digits on a daily basis, often with no particular pattern. A move of 10 percent is now considered uneventful, and with marijuana legislation changing by the day, there seems to be no end in sight to the madness.

Additionally, traders who have been watching weed stocks have likely noticed something else: none of them trade over major exchanges. They all trade on Over-The-Counter (OTC) exchanges, which are decentralized trading markets without a physical location. They are typically subject to fewer regulations and are, therefore, typically less transparent. Additionally, traders often pay a higher commission to buy a stock over an OTC market. They may also receive delayed pricing quotes.

So why exactly do marijuana stocks trade over these markets?

Lack of Revenue and Income

To be eligible for listing on the NASDAQ, stocks need to meet one of the following criteria:

A) $11 million in aggregate three-year pre-tax earnings

B) $27.5 million aggregate three-year cash flows plus $110 million in revenue plus $550 million market cap

C) Either market cap or revenue that far supersedes one of the above requirements

Because the legal marijuana industry is in its infancy, most cannabis companies have not yet turned a profit, and some may even be pre-revenue. As the legality of marijuana unfolds, many of these are still figuring out their business models, so most marijuana stocks are only eligible for listing on OTC markets.

Most are Penny Stocks

With legal marijuana in only two states, the marijuana market is still small compared to its potential. With a general lack of income and revenue, marijuana companies have small market caps. Cannabis Science (CBIS) is worth $81 million, Hemp Inc. (HEMP) is worth $13.5 million, GreeGro Technologies (GRNH) is worth $62 million, Terra Tech ($TRTC) is worth $40 million, and so on.

To provide investors and stakeholders with an adequate number of shares, the price per share of marijuana stocks needs to be small, typically below a dollar.  Because the NASDAQ and NYSE require a minimum $4 share price, in addition to meeting the above requirements, marijuana companies have no other option than OTC exchanges.

Legal Issues

In many ways, marijuana companies are better off in OTC markets. With so much oversight from state and federal governments, marijuana stocks have more freedom trading over-the-counter. Drug legalization is relatively uncharted territory, and the last thing pot stocks need is more oversight.

This isn’t to say that marijuana stocks will always trade OTC. When marijuana is legalized in more states, perhaps even nationally, some companies will emerge as marijuana leaders. At that point, more will be listed under major exchanges.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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Results for hemp
Eric Butz
23 Nov 14 06:52:21
RT @SnootsShakedown: Grandmas Smoking Weed for the First Time https://t.co/KYd3TBZ0Sy $MYEC $TRTC $HEMP $MJNA $QASP $ERBB $MCIG $VPOR $VA…
Dave
23 Nov 14 06:51:24
I didnt know the pro members get the opening bell alerts from http://t.co/qY5MPlJPrU 1 day early. $S $ODP $BAC $GRPN $ARCP $HEMP
PennyStocker
23 Nov 14 06:01:52
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PennyStock Zone
23 Nov 14 05:03:33
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Marijuanacharts
23 Nov 14 04:47:32
mckinley1: $HEMP looking good for this week. We should http://t.co/c0vdOp9HgL
Mark Trader
23 Nov 14 04:15:14
I banked over 200% in gains during my 14-day trial with http://t.co/6cvEHBeuNR. Their 5 guru traders are amazing. $GRPN $ARCP $HEMP
Tulika Sinha
23 Nov 14 03:06:41
RT @Potstocks1: 5 Reasons the next Pot Stock Boom is coming http://t.co/Rc5Mv4w6zR $AGTK $CANN $VPOR $VAPO $EDXC $CBIS $HEMP $PLPL http://…
Pot-stocks.com
23 Nov 14 03:06:01
5 Reasons the next Pot Stock Boom is coming http://t.co/Rc5Mv4w6zR $AGTK $CANN $VPOR $VAPO $EDXC $CBIS $HEMP $PLPL http://t.co/Sbi9ecGZhv
PennyStocker
23 Nov 14 02:55:07
$ELED is breaking out of bullish flag pattern today. Could be a big couple days here. $EBAY $EXXI $HEMP
PennyStocker
23 Nov 14 02:13:20
$ELED is breaking out of bullish flag pattern today. Could be a big couple days here. $GRPN $ARCP $HEMP
Wall Street
23 Nov 14 02:03:45
http://t.co/iQWRYqnOQl....Top penny stocks, NYSE, and NASDAQ trades from the stock market today. +296% last week. $EBAY $EXXI $HEMP
PennyStocker
23 Nov 14 01:54:16
Wowser $ELED in breakout mode. Going long on the 8k news. $GRPN $ARCP $HEMP
Wall Street
23 Nov 14 01:21:56
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HotStockAlert $PKGM$
23 Nov 14 01:07:23
GreenReeper: Daily Candlestick Chart for $HEMP http://t.co/ttxk52fTLv
PennyStocker
23 Nov 14 00:59:20
$ELED is breaking out of bullish flag pattern today. Could be a big couple days here. $GRPN $ARCP $HEMP
Stock Rocket
23 Nov 14 00:58:24
Thanks to the 5 pro traders at http://t.co/5jbX6mNKQv for an amazing week! My win rate was 80%. So sweet. $ARCP $HEMP $ERBB $GERN
Trader News Daily
23 Nov 14 00:48:52
Wow http://t.co/PeRPkZkWiw just posted last weeks results. +429%. Crazy. They offer a free trial too. $TLM $HL $TAUG $HEMP $MOLG
Mark Trader
23 Nov 14 00:34:00
I banked over 200% in gains during my 14-day trial with http://t.co/6cvEHBeuNR. Their 5 guru traders are amazing. $EBAY $EXXI $HEMP
HotStockAlert $PKGM$
23 Nov 14 00:23:23
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$PKGM$ alerted 2day
23 Nov 14 00:23:08
BoomPickens : $HEMP BarChart Technical Analysis http://t.co/7CFVvjIW1K
Stephen s
23 Nov 14 00:21:24
RT @Potstocks1: http://t.co/sh5kdU6AhO - Stay in the Green! https://t.co/hcyhZVKb7d #stocks #trading #weedstocks $CANN $AFAI $UPOT $HEMP $M…
Dave
23 Nov 14 00:12:02
I didnt know the pro members get the opening bell alerts from http://t.co/qY5MPlJPrU 1 day early. $S $ODP $BAC $GRPN $ARCP $HEMP
PennyStockSuperstar
23 Nov 14 00:07:53
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Wall Street
23 Nov 14 00:03:52
Why trade alone? Get real time trade alerts from 5 pro traders at http://t.co/iQWRYqnOQl $GRPN $ARCP $HEMP
Pot-stocks.com
22 Nov 14 23:00:04
http://t.co/sh5kdU6AhO - Stay in the Green! https://t.co/hcyhZVKb7d #stocks #trading #weedstocks $CANN $AFAI $UPOT $HEMP $MYEC
PennyStocker
22 Nov 14 22:52:53
Wowser $ELED in breakout mode. Going long on the 8k news. $GRPN $ARCP $HEMP
WallStreet Pennies
22 Nov 14 22:50:34
Dollar$OnPennies: $HEMP Weekly http://t.co/mTpyhm1gQR
WallStreet Pennies
22 Nov 14 22:50:33
Dollar$OnPennies: $HEMP Daily http://t.co/ap88U4nXih
$PKGM$ alerted 2day
22 Nov 14 22:34:41
Dollar$OnPennies: $HEMP Weekly http://t.co/WMtxnbqfvN
$PKGM$ alerted 2day
22 Nov 14 22:34:41
Dollar$OnPennies: $HEMP Daily http://t.co/PnjLl1UcSQ
Wall Street
22 Nov 14 22:30:51
http://t.co/iQWRYqnOQl....Top penny stocks, NYSE, and NASDAQ trades from the stock market today. +296% last week. $EBAY $EXXI $HEMP
StockAviator.com
22 Nov 14 21:29:41
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Stock Rocket
22 Nov 14 21:15:21
Thanks to the 5 pro traders at http://t.co/5jbX6mNKQv for an amazing week! My win rate was 80%. So sweet. $ARCP $HEMP $ERBB $GERN
Jason Warren
22 Nov 14 20:07:45
RT @upticknewswire: Colorado Grants Charter to Credit Union for Cannabis Industry $ERBB $SING $HEMP $SING $ATTBF http://t.co/1Fn2k1B58T ht…
T Abuhasna
22 Nov 14 19:30:40
RT @Potstocks1: 5 Reasons the next Pot Stock Boom is coming http://t.co/Rc5Mv4w6zR $AGTK $CANN $VPOR $VAPO $EDXC $CBIS $HEMP $PLPL http://…
Trader News Daily
22 Nov 14 19:22:39
Wow http://t.co/PeRPkZkWiw just posted last weeks results. +429%. Crazy. They offer a free trial too. $TLM $HL $TAUG $HEMP $MOLG
Dave
22 Nov 14 19:20:09
I didnt know the pro members get the opening bell alerts from http://t.co/qY5MPlJPrU 1 day early. $S $ODP $BAC $GRPN $ARCP $HEMP
Pot-stocks.com
22 Nov 14 19:05:49
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UPTICK Newswire
22 Nov 14 18:43:08
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UPTICK Newswire
22 Nov 14 18:37:20
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Trader News Daily
22 Nov 14 17:34:41
Wow http://t.co/PeRPkZkWiw just posted last weeks results. +429%. Crazy. They offer a free trial too. $TLM $HL $TAUG $HEMP $MOLG
Stock Rocket
22 Nov 14 17:33:30
Thanks to the 5 pro traders at http://t.co/5jbX6mNKQv for an amazing week! My win rate was 80%. So sweet. $ARCP $HEMP $ERBB $GERN
Wall Street
22 Nov 14 16:21:12
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Stephen s
22 Nov 14 14:16:18
RT @Potstocks1: http://t.co/sh5kdU6AhO - Stay in the Green! https://t.co/hcyhZVKb7d #stocks #trading #weedstocks $CANN $AFAI $UPOT $HEMP $M…
Shyan Chero
22 Nov 14 14:01:30
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Kyle Dreher
22 Nov 14 13:49:18
RT @ammcanfan: Everyone should follow @Marcommsys for #mmpr security education $sprwf $attbf $enrt $lxrp $fitx $mdcn $trtc $twmjf $twd $dsc…
SNOOP LIONBUD
22 Nov 14 13:42:17
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T Abuhasna
22 Nov 14 13:13:02
RT @Potstocks1: http://t.co/sh5kdU6AhO - Stay in the Green! https://t.co/hcyhZVKb7d #stocks #trading #weedstocks $CANN $AFAI $UPOT $HEMP $M…
Pot-stocks.com
22 Nov 14 13:00:07
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Mark Trader
22 Nov 14 12:35:26
Thanks to the pros at http://t.co/6cvEHBeuNR for the $TINO swing trade idea. Up 45% so far. $EBAY $EXXI $HEMP
				
				
By  +Follow January 16, 2014 9:00AM
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