24/02/2015 13:33
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Canadian securities professionals have released a caution to buyers about statements being made by future medical cannabis businesses, saying an overview has shown many are providing deficient info when announcing strategies to be a part of the field.
Securities commissions in British Columbia, Alberta, Ontario and Quebec joined to check press releases from 62 publicly traded firms announcing plans to become cannabis producers under a new federal program that opened last April. This program enables private-sector organisations to grow and then sell cannabis under permit from Health Canada.
The professionals said Twenty five issuers “brought up really serious investor protection concerns” with reports which were unbalanced and omitted critical information, including their stage of development and the certification procedure required for Health Canada. The majority of them were at an initial phase in their organization growth, with many having done virtually nothing to put together a cannabis company.
“Generally, we learned that issuers’ reports were often uneven and promotional in nature,” the assessment proves.
“While the pros associated with engagement in the medicinal marijuana industry were normally discussed, these conversations weren't continually combined with disclosure concerning the risks, uncertainties, cost implications and time needed before the issuer can begin licensed operation.”
The investigation comes following a Globe and Mail investigation illustrated complications with reports provided by CEN Biotech, which was looking for a Health Canada permit to launch Canada’s biggest medical marijuana facility. Health Canada notified this company on Feb. 13 that it plans to deny its application, but the organization was given 20 days to respond.
CEN is owned by Michigan-based Creative Edge Nutrition Inc., which deals on the U.S. over-the-counter market and is not directly regulated by Canadian securities regulators. CEN experienced claims of making wrong statements to investors, including claims the company had been authorized or was on the verge of being certified by Health Canada, when it wasn't.
The wider industry evaluation by Canadian professionals discovered 72 percent of companies which announced plans to enter the medical marijuana area were in the past junior mining companies planning to convert to a new business, whilst a further 8 % were gas and oil companies. The remaining 20 per cent were technology and agriculture organizations, or were new or previously inactive companies.
The report stated professionals discovered that the majority of companies saw a jump in their share price on announcing plans to go into the medicinal marijuana field, “even in instances where small, or any, substantive information was made available to the public about their prospective plans.”
Bill Rice, chair of the Alberta Securities Commission, claimed the disclosures in general are unacceptable for buyers.
“The volume of deficiency in issuers’ disclosure is unacceptable as buyers need to have thorough, well-balanced info to grasp the organization changes being suggested by these issuers,” Mr. Rice said in a statement.
USA marihuana industry analyst Alan Brochstein of 420 Investor, who covers Canadian marijuana firms, stated the whole industry sector is new, and you will find some start-up businesses with “terrifying” disclosures.
He stated he targets bigger Canadian companies which have Health Canada licenses or trade on the TSX Venture exchange because they are more complex in their business and also have much better disclosure practices.
“There’s just a ton of risk within this whole industry, but I feel like the reports are pretty good for those [larger] corporations,” he mentioned. “When you get a tad further into these mining companies, I believe that’s where the bulk of these securities regulators are targeted. Less so on the ones that are already certified.”
He mentioned simple fact Canadian regulators are very closely examining the new field “actually gives me even more confidence,” adding he's reported particularly concerning businesses to the United States professionals and has received little response.
“From my viewpoint, I don’t look at these little mining organizations that are marihuana company wannabes, however the ones I take a look at, I do think the reports are great, and they’re a lot better than they are in the USA.”
The report stated authorities needed 92 per cent organisations it examined to give new statements to buyers to explain their earlier press releases.
Businesses were asked to give very clear discussion of their point of entry into the industry, including what work still needed to be done before a revenue-generating authorized organization can begin functioning, including whether a license application had been submitted and its current status.
The securities commissions mentioned companies must also reveal whether any approvals from the company’s board or stakeholders are still needed to switch into a new market sector or carry on with the suggested business strategy.