The SEC Called About My Pot Recommendation

Written by Jason Simpkins
Posted April 5, 2017

I got one of the scariest phone calls of my life last year.

It was from the Securities and Exchange Commission. They were curious about a stock recommendation I’d made in the Outsider Club.

See, in December 2015, I attended an investor conference in Los Angeles. And when I got back, I was eager to share what I’d learned with readers.

One stock that piqued my interest was Pineapple Express (OTC: PNPL), a company that caters to cannabis retailers. There was nothing weird or illegal about anything I wrote. I just thought the company had an interesting story. So I told it.

Now, when that story was published on January 8, the stock was trading at $3.15 per share.

A week later, it was at $5.90.

A week after that, it was at $8.75.

And by the end of the month, it was over $9.

It stayed there until the spring, when it shot up to $23.95 in late March.

That’s a 660% gain, for those keeping track at home.

I was pretty pleased with myself, and a little bit rueful because I never personally invest in stocks I recommend to readers. Though it would technically be legal if I did, especially if I disclosed my holdings, it feels unethical.

I want readers to know that I would never, ever push a stock for my own benefit.

Still, despite having done nothing wrong, and not holding the stock, I was admittedly unsettled when the SEC called me last April.

They asked all the questions one might expect: who I met with in L.A., what they told me, if I owned any shares, if I was given anything to promote the stock… etc.

I cooperated as much as I felt comfortable cooperating before deciding I’d prefer to have a lawyer present and stopped taking questions.

Thankfully, that was the last I’d hear from them.

In any case, the SEC suspended PNPL from trading on April 28, 2016. It resumed trading in the summer, and its price has since tumbled down to $1.10 per share.

I bring all of this up for one reason: To demonstrate both the potential rewards and potential risks that come with investing in pot stocks.

Make no mistake, there is an enormous amount of money to be made in pot stocks.

This is the dawn of a brand-new industry — an industry that is poised to rival, or even eclipse, alcohol and tobacco.

Massive gains are being made.

For example, Weed Inc. (OTC: BUDZ) is up 2,417% in just the past six months.

Those are the kinds of gains that make overnight millionaires.

But it’s also dangerous.

The cannabis industry abounds with unprepared upstarts and outright frauds that will ultimately flame out.

And it’s an even bigger mess from a regulatory perspective.

Each state has its own set of marijuana laws, and the federal government still considers cannabis a Schedule I drug, alongside heroin, LSD, ecstasy, and peyote. (FYI that means it’s somehow considered more dangerous than OxyContin, cocaine, and Vicodin.)

As a result, there are banks that refuse to handle cannabis industry money or process payments. Many don’t even know if they’re allowed to.

As I said in my original Pineapple Express story:

The cannabis industry is still fledgling. As it stands now, marijuana is still illegal at the federal level. Regulations and accommodations vary state-to-state.

There is no national brand, or powerhouse. There is no Coca-Cola of weed. Rather there is a vast array of start-up companies. Some will hit it big, others will get bought out, and more will fail.

This goes for Pineapple Express, too. The company has as good a chance of any as striking it big, but it's still in its infancy. And there's a lot we don't know about the company in terms of its financials.

For that reason, I wouldn't recommend plowing a huge amount of capital into any one pot stock. Instead, I'd encourage investors to spread their capital among five or six cannabis companies in various parts of the industry.

The landscape is even more difficult today. Now we have an oblivious attorney general, Jeff Sessions, who’s launched his own personal crusade against the drug.

"I reject the idea that America will be a better place if marijuana is sold in every corner store. And I am astonished to hear people suggest that we can solve our heroin crisis by legalizing marijuana — so people can trade one life-wrecking dependency for another that’s only slightly less awful," Sessions said Wednesday. "Our nation needs to say clearly once again that using drugs will destroy your life."

This is a man who, years ago, said the KKK was "OK until I found out they smoked pot."

For all those reasons, the marijuana sector is a little bit tricky. It’s not like investing in gold or oil, or Amazon or Facebook.

This is a whole different beast.

Now, does that mean investors should play it conservative and avoid the sector altogether?

I wouldn’t.

Like I said, the potential rewards are too great to miss out on. We’re talking about life-changing, 10-bagger gains.

No, what I would recommend is that marijuana investors enlist the services of an expert.

What investors need is a seasoned analyst with industry experience, someone who can evaluate these upstart cannabis companies and let them know if they’re for real or not.

And that’s why we launched The Marijuana Manifesto.

You’re no doubt familiar with our analyst, Jimmy Mengel.

Jimmy knows more about cannabis investing than anyone else I can name right now. He’s been out in front of this budding industry since the very beginning. He’s toured marijuana grow houses and retail facilities throughout the United States and Canada.

He recommended a marijuana treatment company, and sold the stock for a 93% gain in seven months. He recommended a Canadian marijuana delivery company that handed out a 73% gain in the same amount of time. And he, and his readers, are still sitting on a pot stock that booked a 380% gain in just three months.

So if you’re serious about investing in pot stocks sign up for The Marijuana Manifesto. It’ll give you all the info you need to bank huge gains and avoid the landmines.

And take it from me, that latter part is crucial. You don’t want the SEC calling your house.

Fight on,

Jason Simpkins Signature

Jason Simpkins

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Jason Simpkins is Assistant Managing Editor of the Outsider Club and Investment Director of The Wealth Warrior, a financial advisory focused on security companies and defense contractors. For more on Jason, check out his editor's page. 

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