The penny stock of Medical Marijuana Inc., a publicly traded corporation involved in the medicinal cannabis business, has drawn a bit of speculative interest over the past few months. While the company and some investors say there is a legitimate case to buy the stock, others claim the stock is a fraud and should be valued at zero.
A new analysis by stock expert Ashraf Eassa published in Seeking Alpha, an investment advice site, makes the case that stock is a “pump and dump,” with retailers piling in and expecting to be able to cash out big.
“While I believe that there are some serious questions that Medical Marijuana’s management needs to answer in response to the short case (allegations of fraud and illegal dealings are serious), that’s neither here nor there with respect to what’s going on with the stock,” according to Seeking Alpha. “This is all a question of stock market dynamics and it all has very little to do with the company itself.”
“This stock smells like a classic penny stock pump and dump,” Eassa writes. “It doesn’t matter to these buyers whether management is credible or not, and investors certainly don’t really seem to care about whether this company generates any free cash flow (it doesn’t, by the way).”
According to Seeking Alpha, “Everything you need to know about a penny stock that has moved several thousand percent is in the chart. This is not a stock that has any material institutional ownership, and things such as ‘cash flow,’ ‘earnings,’ and ‘balance sheet’ mean nothing to the folks buying this stock.”
Eassa writes that “the anatomy of a ‘pump and dump’ is always, always the same,” and Medical Marijuana Inc., he says, is a classic example.