This article is republished from Thursday, 20 October 2016 09:22am, shares are now trading $3.00 from the .18 cent level when we first discovered them.
Thursday, 20 October 2016 09:22am, One thing I will say for shares in WEED Inc (BUDZ) is they have spirit, they may not have the necessary status of a fully filing public company yet, but this week the Tucson, AZ-based company demonstrates what happens when a thin trader (the float for BUDZ is about 1.4M which is really tight) gathers speculators trying to take advantage of a trend.
So, lets look at what happened this week. Shares opened Monday morning at .18 cents per share and you could not safely get in and out of 1000 shares without moving the market – flash forward to today – and you can swing around 20,000 shares with little problem between .60 and .90 cents without issue (keep in mind at the time of this writing the Thursday market has yet to open).
This liquidity feeds on itself because it brings market participants who normally would sit on the sideline. If you are a speculator you need liquidity so you can manage risk. Many pure speculators enter markets from the short side needing the ability to cover if they are wrong. If you trade microcap stocks, often you are taking huge risks shorting a stock at .25 cents simply because the stock can go to $10.00 and you just risked $9.75 to make a quarter – why take this type of over-sized risk?
Many, many microcap traders/speculators do this because so many smaller stocks use shares as currency and you have other market participants who do not care if they sell the shares at .25 cents or .025 cents, they want to get paid as a vendor and are willing to sell at any price. I think many traders in Weed Inc. thought CEO Glenn Martin would be giving away his shares to pay vendors, lawyers, and market awareness merchants so they (these short side speculators) would have the company on the sell side and could safely sell at .25 cents on Tuesday of this week (they – short side spec’s – they did short these shares, and if you view the chart below you can see what happened to them). They were forced to cover these shorts (which they are shorting illegally anyway without a legal borrow) at .40 cents, and if they hesitated, they paid up as much as .85 cents losing almost 3x what they were planning to make. This reverse 300% risk reward is the result, and Weed Inc is the recipient of this forced short covering.
We wrote an article highlighting the company and talked about how as we enter the election Cannabis Stocks were at the height of speculation. The company had zero news, has not yet completed it’s public filing process, and really had not changed anything they are doing in Tucson. I spoke with Glenn E. Martin this week during the peak of the rally and he was as humorously dumbfounded as I was watching the action, Martin said, ” You know Steve, we are not doing anything different than we did when we started the company, and I don’t plan to change, we know what we want to do on the execution side, and we know our shareholders, I don’t know these guys who are shorting our stock as speculators, but it is good they get their due…we want long term holders not flippers…we all have worked too hard to get here..”
The plan for BUDZ is as follows, according to CEO Martin, who focuses on purchasing land and building commercial grade cultivation centers for the legal and medical marijuana sector in the United States. The company intends to consult, assist, manage, and lease its cultivation centers to licensed dispensary owners and organic grow operators. The company was formerly known as United Mines, Inc. and changed its name to WEED, Inc. in February 2015. WEED, Inc. was founded in 1999.
I have known Glenn for more than a decade and watched how he struggled to get control of the shares and put himself and his longtime shareholders in a position to capitalize on the growing Cannabis Sector. He did not pay vendors with his valuable currency like other CEOs, but instead kept it tight, often making sacrifices other C-Levels would not be willing to make.
It is paying off now and the road has just begun for WEED Inc (BUDZ) they still must file, execute the business plan and will certainly have volatility. The speculators from the short side (the haters) will resurface, the way they look at it is that BUDZ owes them a debt for catching their foot in the trap and they will return when they think the time is right. But, beware of tightly held shares and the dangerous turf you step on, you may wind up getting a call from your clearing house telling you you need to cover your short before the bell rings.
Equities has no position in WEED Inc (BUDZ) nor are we paid by the company to write about them.
Contact WEED Inc Glenn E. Martin [email protected] or 520-818-8582 to call him direct.
Steve Kanaval is a former Portfolio Manager in Small& MicroCap stocks and has published more than 10,000 articles on small companies who get little attention. Click here to sign up for the Equities Newsletter and learn more about stocks like these.