To say shareholders are disappointed with American Green Inc (OTCMKTS:ERBB) is an understatement. Reading the message boards and we run across a mix of hardcore believers and skeptics. There was hope when Jonathan Miller became CEO, but so far the stock has not reacted favorably and been on a downtrend all year. Investors are now asking what it’s going to take turn the company around and get the stock price moving higher?
So far, the new CEO has not delivered on any of his promises. The news flow out of the company has been sparse and the company has a series of failures around it’s belt (ZaZZZ Machine). The latest news from the company was that it was seeking one thousand testers for its American Green Xpress smartphone App. American Green said that the App will be a leading-edge mobile solution for patient and customer convenience within the American Green dispensary network and through licensing to third party retail and medical operations.
As the market’s reaction proved, the American Green Xpress smartphone app is not going to get investors buying ERBB. We believe that the only hope ERBB has is that a rising tide will life all boats. In other words, Green Rush 2.0 brings in enough new investors into the sector that pot stocks heat up again. Here, ERBB could succeed because it does have name recognition. It’s one of the first cannabis names to go public in 2009 and has built a shareholder base of over 50,000 investors.
In our opinion, the timing couldn’t be better for the cannabis industry and pot stock investors. According to a report from a cannabis analytics firm New Frontier and Arcview Market Research, sales of recreational pot shot up 184% year over year, up to $998M in 2015 from $351M in 2014. Colorado and Washington state were responsible for a lot of the industry’s growth, the report said. Colorado tax revenue and recreational sales is predicted to be $135M for 2015, a 77% hike from $76M in revenue in 2014. Washington pulled in $70M in tax revenue. Come November, the states of California, Nevada, Arizona, Massachusetts, Maine, Rhode Island and Vermont are all expected to decide on recreational legalization this year. Florida, Ohio, Missouri, and Pennsylvania will vote on medical legalization in some form.
Furthermore, we’re expecting the DEA to reschedule marijuana some time after the Presidential election in November. We don’t believe the DEA wants to wade into a politically charged issue before then. Eight Democratic senators have urged the DEA and its parent agency, the Department of Justice, to drop marijuana from its Schedule I list of controlled substances. The Schedule I classification undermines research on marijuana’s potential health benefits, they wrote.
As it stands, marijuana is classified a Schedule I, a dangerous drug under the confines of the Controlled Substances Act. In the eyes of the federal government, this means that anything derived from the cannabis plant has no medicinal value and a high potential for abuse. Of course, we know this to not be true. A reclassification to Schedule II would give Doctors the ability to prescribe marijuana and would open up the medical marijuana research market. It could also loosen the banking regulations on cannabis stocks and allow for companies to up-list to NASDAQ. The NASDAQ’s denial of MassRoots Inc (OTCMKTS:MSRT) earlier this year was most likely due to marijuana being classified as a Schedule I substance.
In California, things are really heating up. Proposition 64, which is on the November ballot, would allow people age 21 and older to possess and use up to an ounce of marijuana and would allow pot shops to sell cannabis for recreational use. The initiative also includes a provision that could someday allow cannabis sellers to advertise their products in print ads and on digital sites and radio and television stations. If Californians vote to legalize recreational use, overnight it will triple the size of the US cannabis market. So far, Proposition 64 has widespread support. Lt. Gov. Gavin Newsom (D) and at least four California U.S. representatives are supporting the measure. Most importantly, latest polling data shows 60% of Californians in favor of legalization.
Currently trading with a market cap of just $579k, ERBB has done nothing but destroy shareholder value. It’s a sad situation and we sympathize with the company’s 50,000 shareholders. We only hope that the company decides to spend some money on investor awareness instead of squandering shareholder money on salaries and failed projects. The reality is that the cannabis train is leaving the station. It’s a question of if American Green can figure out how to capitalize on it for the good of its shareholders. We will be updating Insider Financial as soon as we know more. For the latest updates on ERBB, sign up below!
Disclosure: We have no position in ERBB and have not been compensated for this article.