Source: GRANT ROBERTSON, The Globe and Mail Published

Dennis Arsenault couldn’t believe what he was seeing. When his company, OrganiGram Inc., made its debut on the TSX Venture Exchange this summer, the shares suddenly shot up.

Such a high valuation didn’t make sense – not even to Mr. Arsenault, and he was the company’s chief executive officer.

Just a few weeks earlier, OrganiGram, an upstart producer of medical marijuana based in Moncton had been valued privately at just over $40-million. But on the open market, speculators feverishly drove up the total value of shares to nearly $120-million in late August.

It wasn’t that Mr. Arsenault didn’t believe in the future of his business. OrganiGram is one of only 15 companies to land a highly coveted federal licence in Canada’s new medical marijuana sector, touted as a potential multibillion-dollar industry in the years to come.

But the company hadn’t made a dime yet. OrganiGram was probably a year away from pulling in meaningful revenue – and it was already worth nine digits in the stock market.

“I was just shaking my head,” Mr. Arsenault said of that first week of trading.

What happened was exuberant, if irrational, and OrganiGram wasn’t the only company feeling the surge.

Investor appetite for Canadian marijuana stocks also turned rival Tweed Inc. of Smiths Falls, Ont., into a $100-million company before it had even logged its first shipment to patients.

Sooner or later, everyone was jumping on the marijuana trend.

Mining exploration companies, frustrated by lacklustre interest in their stocks, were turning themselves into marijuana businesses overnight.

Companies such as Supreme Resources and Affinor Resources were suddenly rebranding themselves as Supreme Pharmaceuticals and Affinor Growers – specialists in a new field – to entice investors. And they, too, saw their stock prices lift.

It’s a market craze that has made early investors rich, and left a large number of retail shareholders in some cases clutching near-worthless paper, as stocks suddenly plummet.

Read full article…

 

Article source: http://www.theglobeandmail.com/report-on-business/inside-health-canadas-marijuana-stock-bubble/article22152087/?cmpid=rss1