Investors should approach cannabis stocks with caution after IGC sinks

Bethan Rose Jenkins, Cannabis News Writer/Editorial

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Back in February, the chief executive of India Globalization Capital (IGC) said that his cannabis company was the only one using blockchain technology. Ram Makunda, the company CEO, really grasped investor attention when he said that “2018 is a very exciting year for us with a lot of milestones investors can watch for.”

His words seriously stimulated investor interest, with shares of IGC IGCC +15.45% escalating 35-fold from 13 cents on August 13 to $13 on October 2. The fact that the company vowed to produce cannabis-based medicines for conditions like Alzheimer’s, Parkinson’s and pet epilepsy probably had something to do with the surge in IGC’s pot stocks.

However, it wasn’t long before IGC’s pot stocks plummeted, with a MarketWatch report triggering an 80 percent drop in shares. Why? Because MarketWatch informed potential and existing investors of the company’s warning flags.

Details have surfaced that raise questions about IGC, what news has surfaced regarding IGC? Firstly, the cannabis company’s chief scientific officer (CSO) has reportedly been altering the data contained in scientific papers.

Secondly, one of IGC’s employees was rebuked by the West Virginia Board of Medicine and forced to pay a fine after failing to divulge that he committed and pleaded guilty to felony tax fraud back in 2012. That particular employee’s name was included on an IGC patent filing for co-inventing a cannabis-based medicine to treat pain.

Thirdly, IGC claims on its official website that is intensely studying the cannabis plant. However, the financial figures don’t quite add up. In fiscal 2018, a mere $137,000 was spent on research and development (R&D), based on the details of an annual report. A separate securities filing revealed how IGC had spent $274,000 on R&D during the first two quarters of fiscal 2019. Now, if we compare this to the average cost required to conduct a Phase 2 clinical trial of a treatment for pain – $17 million – something smells a little bit fishy.

On October 29, shares of IGC came to an abrupt stop, with the New York Stock Exchange (NYSE) declaring its plans to delist the cannabis company stock. In response, IGC said that it “strongly disagrees” with the decision and would begin searching for an alternative listing on “an exchange that embraces our innovation.”

Investors are left dealing with millions of dollars in losses after IGC cannabis stocks plummet

IGC began as a blank-check company and its fluctuating cannabis stocks are a red flag for investors who pour their money into the infantile industry. When MarketWatch published its report, investors prepared for the financial implications, of which left many investors millions of dollars down. 

Fluctuations are a common occurrence for pot stocks. Legalization, medical discoveries, R&D and announcements of innovations in cannabis, such as water-soluble cannabis, have all tipped the scales for cannabis stocks over the last year or so. For example, Tilray soared 29 percent after the Drug Enforcement Administration (DEA) gave it the go-ahead to ship its products to the U.S. for research and medical purposes.

Publicly-traded cannabis companies are navigating through unchartered waters. Various factors may influence whether they boom or bust and in IGC’s case, it’s the latter.

IGC has vowed in a statement that the cannabis company “is working very hard every day to succeed in our business lines and deliver value to our shareholders. Any suggestion to the contrary is both reckless and baseless,” adding that “IGC continues to operate in the Asian infrastructure space as well as the medical cannabis industry.”