mCig, Inc. (OTCBB:MCIG) Headed Back Down
mCig, Inc. (OTCBB:MCIG) managed a single green session, before the sector-wide crash caused by the suspension of a prominent marijuana company took it down yesterday. Now, after a 13.36% drop, the company’s barely hanging on to $0.680.
Just one session ago, MCIG was really looking like it was on its way up. A passable 10-Q, combined with two press releases boasting impressive revenue numbers, launched the company flying to the top of the charts, on amazing dollar volumes. However, even this optimistic turn of events couldn’t prevent MCIG from crashing with the rest of the marijuana branch once the market turned sour yesterday.
The news of Growlife Inc.(OTCBB:PHOT)’s suspension hit the whole cannabis sector hard. Few companies fell as dramatically as AvWorks Aviation Corp. (OTCMKTS:SPLI), but in the end almost all pot stocks suffered a double digit crash. This was certainly an unwelcome surprise for most devoted marijuana stock supporters. But was it really as unexpected as it was dramatic?
When doing due diligence on the majority of the marijuana stocks, even superficial research immediately reveals a striking inconsistency. For instance, it is true that MCIG is making revenues, now more than ever, if its press releases are to be believed. However, a simple number crunch reveals that, currently, its market cap is ridiculously overblown, not unlike those of of most other cannabis companies. At its current price, fallen as it is, MCIG is valued at $183 million. How can a company that had less than $150 thousand to its name just two months ago possibly be worth that?
Perhaps this is the reason why the SEC and FINRA are now taking action to prevent the unchecked share price growth of the more dubious companies on the market. PHOT was almost universally hailed as one of the more believable marijuana stocks out there. Its suspension can be considered a clear indicator for the precariousness of most other companies in the same branch.
Ultimately, it’s up to the investor to decide if he wants to gamble on high risk stocks. However one should always keep in mind what happened to PHOT, how it affected the market as a whole, and how it can happen again to any other over-hyped company, at any time.
