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The legal marijuana industry is the fastest growing industry in the world and this growth has led to a surge in the number of publicly traded companies focused on this opportunity.
While the legal cannabis industry offers investors access to some of the most attractive growth investments, it also offers tremendous risk. Investors need to be careful when investing in the legal cannabis industry and focus on companies that are led by a management team focused on creating value for the shareholders instead of themselves, that are well capitalized, and that continue to execute on previously announced initiatives.
IGC: Risk Outweighs the Reward
When it comes to being a public company, there are only so many things you need to. One of these things is filing company financial results on time. This process is not challenging and companies know that they have to do it to remain in good standing with the stock exchange they are listed on.
Last week, we highlighted a company that we believe offers more risk than reward. The company, India Globalization Capital (IGC) just announced that it will not be filing its quarterly earnings on schedule.
While we would expect this for OTC traded companies, IGC somehow trades on the NYSE so we find this failure to file to be significant.
IGC Is just Blowing Smoke
Last month, IGC announced that it was in the middle of a major turnaround and would be commercializing a product for Alzheimer’s disease. Although IGC has less than $100,000 in cash, the biotech firm said that they will target Germany, Canada and certain medical cannabis states in the U.S. for commercialization.
IGC is not well capitalized and the company does not have enough cash on hand to produce this product at scale. If the biotech firm plans to enter three countries at once, it must have several million dollars if it wants to execute effectively.
IGC CEO Ram Mukunda said that the product will be ready for commercialization in early 2018, which means that we are not going to have to wait too long to watch this initiative prove to be nothing but smoke and mirrors.
IGC CEO Dumps 250,000 Shares of Stock
Over the last few weeks, India Globalization Capital’s Chairman and CEO Ram Mukunda has been selling a lot of stock in his own company. During this time, Mukunda sold 275,000 shares in the $0.40 to $0.51 range.
What we find to be interesting about these sales is the timing of them. For a company that claims to be in the middle of a major turnaround, you must question why the person running the company is selling hundreds of thousands of shares.
IGC does not meet our criteria of a long-term investment opportunity and is still trying to find itself. Besides for focusing on the biotech cannabis industry, IGC also provides construction management services for the construction of a 7-star hotel in Malaysia and rents heavy equipment with operators to construction companies.