logo  
Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?

Register
    

Why Weed Stocks Only Trade OTC

By  +Follow January 16, 2014 9:00AM
Share:
Tickers Mentioned:

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.


Liked What You Read? Join Equities.com as a contributor and get eyeballs on your content FOR FREE!

Results for hemp
Stock Forums
20 Dec 14 16:03:44
$STTK Stock Price Updated Saturday, December 20, 2014 6:41:26 PM $DNNC $HEMP $FONU $ECIG http://t.co/DflXsZFDct
Stock Forums
20 Dec 14 15:03:12
$HAS Company Info Updated Saturday, December 20, 2014 5:41:25 PM $DRAG $HEMP $ONE $MJNA http://t.co/U8zjyeB47R
Investors Hangout
20 Dec 14 14:55:25
$DECN Reviews Updated Saturday, December 20, 2014 5:44:25 PM $HEMP $RGMI $ANY $IJJP http://t.co/VkPlc23Mmq
Chasing Stars
20 Dec 14 14:22:05
$TCEL Opinions Updated Saturday, December 20, 2014 4:45:54 PM $BID $HEMP $EPGL $AVEW http://t.co/94V3BFmGFr
Stockaholics
20 Dec 14 14:18:14
Platinum Memberships Rose, After 528% Gains On Penny Stocks, In One Month! Big Update: http://t.co/2W3yKD2d5Q $AVL $HEMP $CANV
Investors Hangout
20 Dec 14 14:00:26
$GRDO Short Sales Updated Saturday, December 20, 2014 4:42:54 PM $AGMC $DSCR $GRDO $HEMP http://t.co/zUI2tdzqWL
Investors Hangout
20 Dec 14 14:00:22
$QASP Last Price Updated Saturday, December 20, 2014 4:42:54 PM $DSCR $ADMD $HEMP $AGMC http://t.co/XsvmSy6jPc
Investors Hangout
20 Dec 14 13:54:48
$MTVX Stock Forum Updated Saturday, December 20, 2014 4:44:23 PM $HEMP $NSEH $THCZ $HEMP http://t.co/JHPIEYQuXH
Stock Forums
20 Dec 14 13:01:20
$QASP Recent News Updated Saturday, December 20, 2014 3:41:25 PM $HEMP $NSEH $IWEB $GRDO http://t.co/QurSzYVa6f
Stock Forums
20 Dec 14 13:01:19
$GNCP Short Sales Updated Saturday, December 20, 2014 3:41:25 PM $LVGI $AVEW $HEMP $THCZ http://t.co/PKsSy7BM2A
Chasing Stars
20 Dec 14 12:20:12
$MELY Opinions Updated Saturday, December 20, 2014 2:45:58 PM $MTVX $HEMP $GTPH $ECIG http://t.co/EDNWiT9D4R
Chasing Stars
20 Dec 14 12:20:11
$MTVX Recent News Updated Saturday, December 20, 2014 2:45:58 PM $BID $HEMP $IWEB $BMIN http://t.co/6YTZMuxskL
Chasing Stars
20 Dec 14 12:20:03
$CGRW Stock Price Updated Saturday, December 20, 2014 2:45:58 PM $DECN $ONE $NTEK $HEMP http://t.co/dfkycmsOnH
StreetSmoker
20 Dec 14 12:08:14
RT @Invest420: #DailyDab $GWPH $INSY $XXII $NVLX $MDBX $ERBB $MJNA $FITX $TRTC $FULL $HEMP $VPOR $CBIS $TAUG $MCIG $GRNH http://t.co/uJf1NI…
Investors Hangout
20 Dec 14 11:58:19
$ADMD Investor Opinions Updated Saturday, December 20, 2014 2:42:54 PM $ONE $LVGI $MTVX $HEMP http://t.co/RGxGHAn9SC
SAMWISE DANKWEED
20 Dec 14 11:52:52
RT @GB_Niner: @moon_shine15 gonna be watching some of the classics $TRTC $ERBB $ATTBF $SPRWF $CBIS $MJNA $HEMP $VAPE
Chasing Stars
20 Dec 14 11:19:39
$GDGI Investor Opinions Updated Saturday, December 20, 2014 1:46:01 PM $ECIG $HEMP $ERFB $AVEW http://t.co/h9bW0KHkKu
Geoff Butler
20 Dec 14 11:06:01
@moon_shine15 gonna be watching some of the classics $TRTC $ERBB $ATTBF $SPRWF $CBIS $MJNA $HEMP $VAPE
Stock Forums
20 Dec 14 10:58:37
$MELY Percent Change Updated Saturday, December 20, 2014 1:41:26 PM $HEMP $PLKD $LVGI $NVLX http://t.co/s3YrsWwTZ2
Investors Hangout
20 Dec 14 10:57:15
$NTEK Company Info Updated Saturday, December 20, 2014 1:42:58 PM $INCC $HEMP $EPGL $CEO http://t.co/ml0gF7tg2H
Investors Hangout
20 Dec 14 10:51:34
$NSEH Reviews Updated Saturday, December 20, 2014 1:44:30 PM $MELY $AZFL $HEMP $STTK http://t.co/MWh0ptFc53
Investors Hangout
20 Dec 14 09:50:19
$ERBB Stock Price Updated Saturday, December 20, 2014 12:44:29 PM $FITX $LVGI $NVLX $HEMP http://t.co/vWAMEzkKFM
Stockwiz
20 Dec 14 09:21:23
RT @Chasing__Stars: $HEMP Filings Updated Saturday, December 20, 2014 11:46:02 AM $NTEK $ADMD $DSCR $GRCU http://t.co/0khklQsZWs
Chasing Stars
20 Dec 14 09:18:08
$HEMP Filings Updated Saturday, December 20, 2014 11:46:02 AM $NTEK $ADMD $DSCR $GRCU http://t.co/0khklQsZWs
Chasing Stars
20 Dec 14 09:18:03
$AZFL News Updated Saturday, December 20, 2014 11:46:02 AM $MJNA $HEMP $PLKD $HEMP http://t.co/c3wYJSAnd2
Marijuanacharts
20 Dec 14 09:12:15
Fred Kadiddlehopper: $HEMP is really not in the business of http://t.co/SodNOBTo91
Stock Forums
20 Dec 14 08:57:39
$HEMP Last Price Updated Saturday, December 20, 2014 11:41:25 AM $FITX $NTEK $DNNC $ANY http://t.co/8meXpfEYYW
Investors Hangout
20 Dec 14 08:55:22
$RGMI Short Sales Updated Saturday, December 20, 2014 11:42:59 AM $HEMP $MELY $KSSH $DNNC http://t.co/QPJ19lLdga
Investors Hangout
20 Dec 14 08:49:46
$AVEW Recent News Updated Saturday, December 20, 2014 11:44:31 AM $IJJP $MJNA $HEMP $AVEW http://t.co/QoywQsnFRM
Kara Coffey
20 Dec 14 08:07:06
U want a taste of that #potbarons ? Get in the PotRush in the stock market! $myec $mine $vpor $mcig $hemp $canl $erbb #potrush #marijuana
Investors Hangout
20 Dec 14 07:54:34
$NTEK Recent News Updated Saturday, December 20, 2014 10:42:58 AM $HEMP $BID $QASP $IWEB http://t.co/7qDC5q9KYo
Investors Hangout
20 Dec 14 07:49:14
$NSEH Short Sales Updated Saturday, December 20, 2014 10:44:29 AM $MELY $MJNA $HEMP $NVLX http://t.co/xBMl6fCada
Investors Hangout
20 Dec 14 07:49:12
$BYSD Investor Opinions Updated Saturday, December 20, 2014 10:44:29 AM $HEMP $MJNA $IJJP $CGRW http://t.co/QCdoUaDmSQ
Marijuanacharts
20 Dec 14 07:38:02
PCB Inc.: $HEMP has a history for good trading .01-.06 http://t.co/r6EXl11c0S
Stock Forums
20 Dec 14 06:56:10
$STTK Investor Opinions Updated Saturday, December 20, 2014 09:41:25 AM $AZFL $TCEL $HEMP $AZFL http://t.co/6bNx17EIlU
Investors Hangout
20 Dec 14 06:54:13
$HEMP Stock Message Board Updated Saturday, December 20, 2014 09:42:58 AM $AZFL $LVGI $GDGI $HEMP http://t.co/FRAaNOfCY7
Brandon Charles
20 Dec 14 06:50:07
RT @DavethSABe: U want a taste of that #potbarons ? Get in the PotRush in the stock market! $myec $mine $vpor $mcig $hemp $canl $erbb #potr…
Chasing Stars
20 Dec 14 06:15:07
$TNEN Stock Forum Updated Saturday, December 20, 2014 08:46:00 AM $BID $HEMP $LVGI $CEO http://t.co/GvTCvp5sTy
Chasing Stars
20 Dec 14 06:15:05
$ONE Last Price Updated Saturday, December 20, 2014 08:46:00 AM $HEMP $CEO $NSEH $MELY http://t.co/PkRRR4Ydso
Stock Forums
20 Dec 14 05:55:40
$HEMP Stock Forum Updated Saturday, December 20, 2014 08:41:25 AM $ECIG $CGRW $DSCR $NRDS http://t.co/7c6ZcWBxHo
Stock Forums
20 Dec 14 05:55:33
$FONU Opinions Updated Saturday, December 20, 2014 08:41:25 AM $ITKH $HEMP $ONE $ERBB http://t.co/xpOyPgt5jF
Investors Hangout
20 Dec 14 05:53:15
$HEMP Short Sales Updated Saturday, December 20, 2014 08:42:57 AM $IWEB $DRAG $MINE $DRAG http://t.co/0bqH2xwagH
Investors Hangout
20 Dec 14 05:47:19
$DNNC Stock Forum Updated Saturday, December 20, 2014 08:44:28 AM $HEMP $BMIN $PLKD $NTEK http://t.co/WTYaEYHQ3G
Investors Hangout
20 Dec 14 05:47:16
$HEMP Opinions Updated Saturday, December 20, 2014 08:44:28 AM $NRDS $MELY $EPGL $CEO http://t.co/UHoKXdLJe5
Chasing Stars
20 Dec 14 05:15:15
$DNNC Reviews Updated Saturday, December 20, 2014 07:45:59 AM $PLKD $ONE $TCEL $HEMP http://t.co/UXtJzvYiCI
Chasing Stars
20 Dec 14 05:15:11
$TCEL Company Info Updated Saturday, December 20, 2014 07:45:59 AM $NRDS $ADMD $RGMI $HEMP http://t.co/MagA2jI4AH
Chasing Stars
20 Dec 14 05:15:10
$AZFL Investor Opinions Updated Saturday, December 20, 2014 07:45:59 AM $HEMP $DECN $THCZ $ONE http://t.co/5Ne8O5S5fe
Stock Forums
20 Dec 14 04:54:40
$HEMP Stock Message Board Updated Saturday, December 20, 2014 07:41:25 AM $MELY $BMIN $MELY $MELY http://t.co/db5iWgfKr8
Investors Hangout
20 Dec 14 04:46:14
$GRCU Percent Change Updated Saturday, December 20, 2014 07:44:28 AM $RGMI $MJNA $HEMP $AGMC http://t.co/tPzye81HK3
Investors Hangout
20 Dec 14 04:46:11
$FITX Last Price Updated Saturday, December 20, 2014 07:44:28 AM $FITX $HEMP $BYSD $BID http://t.co/PYeIMNKoKp
				
				
By  +Follow January 16, 2014 9:00AM
Share:

Comments

 

blog comments powered by Disqus

About us

Equities.com is the most advanced interactive online social ecosystem for the financial industry, serving as a resource center and next-generation communication platform that connects self-directed investors with public issuers, market experts, and professional service providers and vendors. Registered members can leverage our exclusive proprietary research tools such as the Small-Cap Stars, which outperformed 90% of all small-cap mutual funds, and robust do-it-yourself E.V.A. research reports. The Equities.com Issuer Dashboard is the ideal tool to communicate and manage investor awareness campaigns to the investment community, as well as to access valuable resources to help your company grow.

Market Data powered by QuoteMedia.
Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. Terms of Use.