Another Pot Stock Bites the Dust. Cannabusiness Group (OTCMKTS:CBGI) Suspended
The company that we now know as Cannabusiness Group (OTCMKTS:CBGI) was called Muscle Warfare International, Inc not that long ago. The stock was traded under the MWAR symbol and they were focused on the sports nutrition industry. If they had kept their previous business plan, things would have looked a lot better now. Unfortunately, back in February, they decided to ride the wave of excitement around the marijuana industry and right now, the shareholders are the ones left to bear the consequences.
As you probably know, three months ago, CBGI announced the change in the name and ticker symbol, said that there’s a new management team, and informed the investment community about the new business plan. Not surprisingly, the hype around the pot sector, along with more than a few forward-looking press releases sent the stock on an impressive run.
At the beginning of February, there was no volume and the price was hovering around $0.02. Just thirty days later, CBGI was one of the most heavily traded penny stocks out there and on March 18, it managed to reach its $0.48 per share 52-week high.
There were people who believed that this was just the beginning, but unfortunately, the pressure got a bit too much and the ticker began sliding towards the bottom of the charts. By the end of March, it was already below the $0.20 mark and it wasn’t going to stop there. Hype around the cannabis industry in general dissipated somewhat during April and, not surprisingly, CBGI felt the effects. The first sessions of May saw it hovering around the $0.05 mark which is exactly 89% below the 52-week high.
Despite the devastating performance, there were some people who believed that CBGI has the potential to recover. Others, however, were understandably infuriated with the drop and thought that the company is nothing more than another shady pot stock that is going to cause a lot of money to disappear down the drain. It would appear that the regulatory organs are more inclined to agree with the latter.
A few minutes before yesterday’s opening bell, the SEC placed a suspension order on CBGI stating that there are some “questions regarding the accuracy of publicly available information about the company’s operations“.
Several hours later, CBGI‘s CEO, Michael Cummings issued a press release with which he expressed his surprise. He said that he hadn’t been notified about the SEC’s action beforehand and claimed that he’ll do anything he can to help the Commission with the investigation. He also informed his shareholders that once the suspension is lifted, “trading will resume as normal“.
That might not be strictly the case. The order is indeed a temporary one which means that in two weeks’ time, you will be able to trade CBGI shares once again. Unfortunately, the ticker will most likely be relegated to the Grey Market. On the right, you can see the charts drawn by Growlife Inc (OTCMKTS:PHOT), Advanced Cannabis Solutions, Inc. f/k/a Promap Corp (OTCMKTS:CANN), and Petrotech Oil & Gas Inc (OTCMKTS:PTOG) – three pot stocks that have already gone through the same treatment. It’s pretty clear that the lowest tier of the OTC Markets isn’t doing them any favors.
CBGI will most likely follow in their footsteps which means that some more money might be lost. That brings us to an interesting question: “Was all this avoidable?“.
The people who did some proper research and due diligence knew that things were looking somewhat shady from the very beginning. As you can see from our articles, CBGI‘s initial pot-related press releases weren’t entirely convincing and some of the forward-looking statements were even copied directly from announcements made by other companies. The diligent investors also knew that during the first quarter of 2014, the company issued 45 million new shares at prices ranging from $0.0001 to $0.00285 per share.
So, yes, the people who did the right amount of research saw the red flags and were probably able to get out on time. Unfortunately, not everyone was so lucky.