It might sound obvious, but not all initial public offerings (IPOs) are created equal.
"Hot" tech IPOs, for instance, can be pricey, and nearly impossible to buy at fair prices. Quality can be inconsistent. For every Microsoft Corp. (NASDAQ: MSFT), there might be two companies like Uber Technologies Inc. (NYSE: UBER).
The cannabis industry, on the other hand, boasts some of the best, richest, and easiest to own IPOs on the market. That's just one of the reasons the entire sector is minting millionaires at a rapid clip.
For instance, back in December 2018, we found 77 different, everyday people who'd grossed $1 million or more in cannabis. Today, our confident estimates put that number north of 239.
And the thing is, these numbers are only going to increase as the United States moves inexorably toward complete legalization.
Here's how you could find yourself on the growing cannabis millionaires' list a lot sooner than you think...
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PERFECT! Prohibition Is Backing into a Smaller and Smaller Corner...
Time was, when you were researching the U.S. marijuana sector, you could name the states where cannabis was legal.
But the momentum of legalization is so strong, it's now much easier and faster to rattle off the dwindling number of U.S. jurisdictions where cannabis remains fully illegal.
According to DISA Global Solutions, Cannabis is totally prohibited in just nine states - Idaho, Wyoming, South Dakota, Wisconsin, Kansas, Kentucky, Tennessee, South Carolina, and Alabama - accounting for around 32.7 million people, or around 10% of the U.S. population.
Farmers, Chefs, Electricians: 239 everyday people have been crowned "marijuana millionaires." Here's how you could be next...
As of June 2019, the Marijuana Policy Project reports that marijuana reform and/or legalization bills were under consideration in 25 U.S. state and territorial legislatures, including some of the nine states under prohibition.
Now, it's true some of those bills stalled before legislatures adjourned, but still others have landed or are due to land on governors' desks, most notably in the Pacific territory of Guam.
Against this backdrop - one that's promising and getting more so by the month - I expect we'll see even more cannabis IPOs than ever before, and that's fantastic news for everyone...
Where to Start with Marijuana IPOs
The biggest thing to know about cannabis IPO investing, at least for now, is that marijuana stocks mostly trade on either the Toronto, Ont.-based Canadian Securities Exchange (CSE), or in the over-the-counter (OTC) markets.
Why won't you find them on the main U.S. exchanges? Well, cannabis is still illegal under U.S. federal law, so the New York Stock Exchange and NASDAQ don't want to run the risk of listing a U.S. cannabis company. So, as it stands now, most cannabis companies will first go public on the CSE or the Toronto Stock Exchange in Canada, and then they will look to get an OTC ticker later on.
If a company has an OTC symbol, then it's (normally) easily purchased through big American brokerage firms. It might take longer to buy an OTC symbol, so that is just something to keep in mind. Depending on the demand for a stock, we've found it is often better to wait for it to trade over the counter.
10 Private Cannabis Companies Could Go Public within the next 35 days alone, potentially producing millions in new wealth for early investors. Click here to learn more...
I can't recommend specific brokers, but my readers have said they've found Fidelity Investments and TD Ameritrade easy to work with when it comes to trading Canadian stocks.
With that in mind, here's a look at what's just around the corner...
The Future Looks Bright for Cannabis IPO Investors
A 50-year study found the average U.S. IPO will be priced 17% cheaper than it should be. So if you buy shares on IPO day - what history tells you is that you're already up 17% on day one.
It's not a bad start.
Of course, there are extremes; some companies discount 50% - some a lot more.
But you're going to want to be there at the very beginning - IPO day.
And a winning IPO comes down to just three things.
First, you want a company with a really good management team. It's not the Wild West out there anymore. Retired hippies with greenhouses acting as CEOs just won't cut it any longer.
Second, you want a company with a great brand and significant distribution channels. Remember, there's going to be explosive growth over the next couple of years.
The last thing - and it's a big one - is the share structure of the company. Because remember, when a company debuts, it's new to the market... but it's not a new company. Usually, it's been doing business for years as a privately held company.
So you only want to get into a company with a well-structured IPO from an experienced management team.
There's a tremendous amount of potential here for savvy investors.
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About the Author
Greg Miller started working on Wall Street in September, 1987, just a month before the “Black Monday” stock market crash.
During his career there, he became an expert in just about every kind of publicly traded security - from blue-chip and small-cap stocks to municipals, junk bonds, and derivatives. As a portfolio manager, Greg was responsible for over $500 million of assets in mutual funds and insurance company accounts.
After leaving the Street, he designed a successful options trading strategy and made lucrative tech investments for a financial publication. He has also helped develop new products and worked with other editors to hone their strategies. He’s always been dedicated to deep, fundamental research - and he always will be - because he believes buying the very best companies at the right price is the best way to amass wealth in the stock market.