Cannabis companies are all puffed up

Pot smokers have a reputation for being laid back. But in the US, the pot market is anything but mellow. Legal sales of cannabis - it is legal for medical use in 23 states and for recreational use in four - grew 75 per cent last year to reach $US2.7 billion, according to ArcView Group. ArcView expects that 14 more states will legalise recreational use in the next five years.

The stock market offers few ways to catch the buzz. Cannabis is still illegal at the federal level in the US, which means that companies profiting from cannabis are unable to get loans from FDIC-insured banks, and are often limited to state-specific markets. Most public marijuana companies are penny stocks traded on OTC markets. Some are prone to manipulation. Last May the US Security and Exchange Commission published a warning of possible scams involving marijuana-related micro-cap stocks. In August the...

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