Tuesday, February 26, 2013

A Penny Stock Play On Weed

Let me briefly interrupt earnings season to bring you the tale of a penny stock marijuana play.

The company in question is called LC Luxuries (LLUX.PK). Not all that long ago, it was known as Makeup.com, before which it was called Tora Technologies. The company was born back in 2004 as a classic Vancouver shell company; the first president of the company was a stock promoter named Ralph Biggar. The Vancouver Sun reported in 2006 that the Tora initially had no assets except a services agreement with a company called LA Embroidery to market its custom embroidery service on the Web. LA Embroidery, the story noted, was owned by a Hell’s Angel named Tony Pires.

The same story notes that one of the latest shareholders of the little company was Susan Jeffs, the wife of another Vancouver stock promoter named Rick Jeffs, who in 2007 was barred from engaging in investor relations activities in British Columbia for five years. The company later bought the Makeup.com web domain from a company called Manhattan Assets Corp. The same domain had previously been owned by David Jeffs, another members of the Jeffs family.

Anyway, at some point in 2009, Makeup.com filed with the SEC to terminate its status as a reporting company; which is never a good thing, needless to say, for a publicly traded stock. At some point after that – hard to tell since they no longer file financial statements – the company then changed its name to LC Luxuries. On August 24, the company announced that it was now controlled by James Pakulis and Douglas Francis, each with a 46.3% stake.

And that’s where the fun started. On the day of that announcement, the stock was being quoted at 2 cents, and hadn’t completed a trade in three weeks.

But look what happened after that:

  • On August 26, the company added a new director, a doctor named Bonni Goldstein. On that day, the stock went from 2 cents, to 51 cents.
  • On August 27, the company announced that it had commenced operation of a new unit called U.S. Cannabis,� to manage medical marijuana clinics. The stock went from 51 cents, to $1.01.
  • On September 3, the company said it was negotiation to buy WeedMaps.com, which maintains a database of medical marijuana dispensaries, and allows people to advertise their wares. The stock closed at $1.03, after trading a few days earlier as high as $1.34. And then things truly went nuts, and some investors imagined investing in the first great online marijuana play.
  • On September 30, LC Luxuries announced that U.S. Cannabis had commenced operations, and that it had a letter of intent to buy a majority stake in� WeedMaps from its founder, a guy named Jason Hartfield, for undisclosed terms. By that point, the stock was on a total roll, and the shares closed at $4.40. Remember that just over a month earlier, they were trading for two pennies a share, when they traded at all.
  • The parade of announcements has continued. The company acquired the CannaCare.com domain name. It announced plans to offer “merchant services to healthcare providers, dispensaries and retailers in the cannabis industry that are located in states permitting medicinal cannabis.” It said it will offer “management and consulting services to dispensaries, collectives and associations.” And, not least, the company said that the deal to buy WeedMaps is moving forward.

TechCrunch on Monday reported that WeedMaps CEO Hartfield claims his company generated $300,000 in revenue in August and $400,000 in September; Ergo, LX Luxuries rose 35 cents, or 8.2%, to $4.60. The company has at least report 9.7 million shares out, but really, who can be sure, give that it has stopped reporting to the SEC. So, go ahead, ye who believe every crazy story stock that comes your way, and bet on the first great public marijuana play. Or, if you want; or hold off a bit, chill out with a nice…beer…and see if they ever report some audited financials.

Free advice: Do what you can to avoid the penny stock munchies.

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