Medican Enterprises Inc (OTCBB:MDCN) – Another Hype-Fueled Pot Stock
More than 302 thousand shares of Medican Enterprises Inc (OTCBB:MDCN)’s stock changed hands during yesterday’s session, resulting in a dollar volume of around $940 thousand. The ticker opened the day at $2.50 and, after six and a half hours of intense trading, it closed it at $3.49 meaning that the market cap currently stands at nearly $95 million.
Looking at these figures, you might be thinking that MDCN is an operating company that has been in the business for quite some time. You might also assume that they are generating respectable revenues and that they have a solid financial backing. Unfortunately, there are absolutely no documents or press releases to support that theory.
MDCN was nothing but a shell until a couple of months ago. The enterprise was incorporated a while back and although they tried their hands at numerous industries, they failed to make a significant impact on any of them. Not surprisingly, the latest 10-Q shows that, as of September 30, they had:
- no assets
- $146 thousand in liabilities
- no revenue since inception
- $21 thousand in losses for Q3 of 2013
As you might imagine, however, some things have happened since then. A management services agreement was signed in November which means that MDCN is no longer a shell.
Although they don’t mention this on their website, they are apparently in control of an online magazine called Cannabis Magazine. At the moment, it’s nothing more than a website, but, according to one of the latest 8-K forms, they want to print a hard copy of it and distribute it for free in over four thousand licensed dispensaries. In fact, if the filing is to be believed, it should be out at the moment.
The pot industry is a hot topic not only among investors and there should be plenty of audience for such a publication. Being free, however, means that revenues can only come from advertising and apparently, MDCN‘s management team reckon that this is not enough.
That’s why, on their website, they say that they have an “in house team of R&D professionals” whose efforts are going to help advance the industry. They also say that MDCN‘s business and finance executives can provide other enterprises working in the cannabis sector with consulting services. What’s more, the company’s OTC Markets profile tells us that MDCN want to become the first commercially licensed producer of medical marijuana in Canada.
Having gone through the SEC filings and the website, however, we can see a couple of discrepancies. The website does quote an “in house team of R&D professionals“, but the official documents state that as of October 1, 2013, MDCN had only one employee. The financing services business too is surrounded by a lot of questions since we don’t know what MDCN‘s own situation is. As you can see, the latest report covers a period during which the company was still a shell and we have not seen any press releases informing us about fresh financing.
And this brings us on to the problem with the stock performance. As you can see, the ticker has appreciated significantly over the last couple of weeks, but it is fueled by nothing more than hype and excitement. There are no hard numbers or even press releases to support the colossal market cap which makes the danger of a sudden and violent correction very real.
That’s why, evaluating the risks very carefully is absolutely essential. Unless, of course, you want to end up like the people who got a bit carried away with the excitement around Gold Coast Mining Corp (OTCMKTS:GDSM) – another small cap enterprise that wanted to make a name for itself in the growing cannabis sector. As you can see from the chart on the right, GDSM was pushed quite high when the enthusiasm was still strong. Yesterday, however, the company announced that there are some issues with the new business and, not surprisingly, the ticker slashed half of its value.
