Penny Stock General Cannabis Triggers Regulatory Scrutiny Over Promotional Concerns

general-cannabis-logoCannabis stocks have been on quite the tear, with the index almost doubling from the levels near the end of August as traders gravitate to the sector in front of several state legalization initiatives next month. One of the big movers has been General Cannabis (OTC: CANN), which was formerly Advanced Cannabis Solutions.  The company has several divisions, the largest of which provides security solutions in Colorado.

From August 31st until its peak this morning, the stock had appreciated by over 500%. Today, though, it has given up a lot of those gains:

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The stock quickly lost more than 1/3 of its value after the company a press release detailing the concerns of OTC Markets, where its stock trades:

On October 12, 2016, OTC Markets informed the Company that it became aware of certain promotional activities concerning General Cannabis and its common stock. OTC Markets informed the company that it had received copies of promotional newsletter emails encouraging investors to purchase the Company’s common stock. The Company has been informed that this promotional activity coincided with higher than average trading volume in the Company’s stock. The Company was unaware of the promotional activity until informed by OTC Markets and is unaware of the full nature and content of this promotional activity, the responsible parties and the extent of the email newsletters’ dissemination.

The company’s CEO, Robert Frichtel, who filed a Form 144 to sell 100K shares and has sold 25K shares yesterday (not yet reported to SEC with a Form 4), stated that the company was not aware of the promotional activity until being alerted by OTC Markets. In early 2014, CANN was the first major cannabis stock to be suspended from trading by the SEC due to the activities of an unaffiliated third-party. The company later regained its OTCQB listing.

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Exclusive article by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online communities 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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