Recently there has been a growing number of so-called marijuana/cannabis financial journalists or analysts specializing in microcap and penny stocks within the marijuana sector. The Securities and Exchange Commission has long recognized this looming danger and in fact warned investors years ago about the dangers of fraud and penny stock scams within the marijuana sector, via an investor alert.
Lori J. Schock, director of the SEC’s Office of Investor Education and Advocacy, which prepared the investor alert said that “Given the attention that marijuana-related companies have attracted recently, we urge investors to exercise caution when looking at investments in this space. Always thoroughly research the company – and the person selling the investment – before making a decision.”
Per Schock, not only should investors be wary of these small marijuana companies, but they should not trust the news spread by marijuana industry investor advisors or analysts. This makes sense as it is not uncommon for penny stock, OTC, pink sheet companies to hire a person or company promote their company via stock tout newsletters, bloggers, analyst articles and other vehicles of spreading “news” or otherwise creating investment excitement about the company.
Many such services are now popping up within the cannabis sector offering “news” or opinions about select marijuana companies. For instance, Alan Brochstein is the self-proclaimed “Leading Cannabis Financial Analyst in the marijuana industry.” Brochstein promotes industry and company news for free via his New Cannabis Ventures Newsletter. But he a has a monthly paid membership site at 420 Investors. For the thousands of members who pay $42 a month, they get Brochstein’s recommended trades in and out of small cannabis companies on a daily basis. These recommendations come via texts, emails and on his member website.
Brochstein claims to only give objective news in exchange for the $100,000+ his newsletter subscribers pay him every month. Yet, he also sells marijuana companies services such as extensive public relation services, digital marketing, content publishing, and social media advertising to connect to his extensive network of investors. So presumably, a marijuana company can pay Brochstein’s media company and then have their company touted on his member sites, social media and large investor followings on sites such as LinkedIn.
In looking further at the small network of financial journalists in this space, you can see Brochstein’s reach goes much further than just his own channels. Over the last couple of years, he has teamed up with others who also have following in the sector, on seemingly what appears to be smear campaigns. Most Recently (July 6th, 2017), Debra Borchardt, a Forbes financial journalist wrote a piece regarding on the publicly traded Social Media network Massroots. In the article Borchardt makes remarks quoting Brochstein who makes accusations that seemingly can’t be verified. The next day, the stock seemed to be adversely affected.
In looking even deeper at Brochstein’s influence, you can see Brochstein’s relationships go far and wide, as he also writes for Seeking Alpha and has an influential presence on twitter and Instagram.
Within the past few months the SEC has brought numerous civil and criminal actions against similar such stock touts, newsletters and blogs. The SEC has also attempted to warn investors via an Investor Alert titled “Beware of Stock Recommendations on Investment Research Websites” telling investors to be alert to stock promotion or smear schemes conducted through social media, investment newsletters or emails to name a few of the methods.
Thus, investment advice from Brochstein or anyone next to him and or other touts, analysts, or investment advisors like him, should be viewed with caution as the members, followers or subscribers may never know the true motivation or source of the objective “news” or recommendations they are disseminating. This is especially true in the growing marijuana sector.