The FDA spooked CBD companies this week, but it doesn’t change where the “Year of CBD” is headed…

The United States Food & Drug Administration (FDA) sent a warning shot across the bow of the cannabis health and wellness industry on Tuesday.

In a letter to Curaleaf Holdings Inc. (CSE: CURA, OTC: CURLF), the FDA warned the company that it was improperly labeling and marketing CBD products by making specific health claims.

Investors immediately slammed U.S. Cannabis stocks, which resulted in a decline of 3.6% for the NICI U.S. Cannabis Index. Curaleaf’s stock suffered more, selling off 7% and continuing its decline yesterday.

The selloff was understandable. Companies capitalizing on the booming CBD market is a large part of investor expectations. Any obstacle to realizing those revenues lowers expectations and, hence, the price investors are willing to pay for stock.

But, the market’s response was ultimately an overreaction. That’s because the letter was more a reflection of fantastically poor judgment on Curaleaf’s part than on the marketability of CBD to consumers as a health and wellness product.

And that reaction could create an opportunity for shareholders of the largest cannabis company in the world…

Let the CBD Market Do the Work

Curaleaf’s error was that it made specific health claims about its CBD products. On its website, the company stated that its CBD is a treatment for chronic pain, pain resulting from cancer, for ADHD, and other untested claims.

But, for the industry as a whole, it is perhaps more worrying that the FDA said that Curaleaf did not include directions for use on its packaging. But the letter then goes on to contradict this charge by stating there is no such thing as proper directions for use since the FDA hasn’t approved CBD for any use.

And most worrying of all, the FDA targeted some of Curaleaf’s creams and balms; products that consumers don’t ingest. Generally, the FDA has been much more lenient about such products.

I’ve written before about smaller companies making unverified claims about CBD and the FDA going after them. Curaleaf is a much bigger target than those smaller companies, and the investing public has a right to be concerned.

The one thing you don’t do when marketing health and wellness products that aren’t drugs approved by the FDA for specific treatments is make specific claims. This is so obvious that it makes you wonder where Curaleaf’s lawyers were. By comparison, Curaleaf’s competitors make no specific treatment claims.

These companies want to avoid attracting the FDA’s attention. In fact, some avoid advertising the fact that their products even contain CBD, which frankly is a mistake in the other direction.

But there are two reasons not to panic here. First, Curaleaf did go further in its claims than many competitors. An easy to remedy error.

The big lesson here is that companies should simply sell CBD products and let the public learn how and why to use them from other sources. The news about CBD is spreading more quickly then even I, a CBD bull from the start, imagined it would.

So let the market do your work for you.

The second is that the FDA is currently reconsidering its rules. They will likely relax them in a way that is favorable for the CBD industry. S

This is likely a short-term problem.

Curaleaf is like the last speeder to get a ticket for going 70 in a 55 zone before the speed limit goes up to 70. It’s a ticket, but no one needs to worry about it too much since soon, everyone will be driving at 70 legally.

I suspect that Curaleaf will quickly correct its website to the satisfaction of the FDA and, based on an acquisition it entered into just last week, the company can get back to work building the largest cannabis company in the world.

This cannabis investing method could make you $17,500 in 24 hours. Find out how right here.

Taking the Lead Through the Scale Phase

Just last week, Curaleaf announced it was acquiring GR Companies Inc. (“Grassroots”) for $875 million.

The terms of the deal included a payment of $75 million in cash and the rest in Curaleaf stock. This purchase, along with a pending purchase of Cura Partners Inc., rolls more revenues into Curaleaf’s coffers than any other cannabis company in the world.

The Grassroots acquisition is brilliantly complementary, getting the company into Illinois, which recently went legal, and Pennsylvania. The combined company will be in 19 states, hold 131 dispensary licenses, and have access to 55% of the country’s population.

The deal puts Curaleaf in the lead as the industry enters the exceptionally high growth Scale phase. Canadian LPs may have an edge when it comes to European expansion, but multi-state operators (MSOs) in the U.S. are selling into the largest legal market in the world, and Curaleaf will sell more product than any of them.

I originally recommended Curaleaf to Cannabis IPO Insider members back in October, a position which they ultimately sold for a 90% gain. That doesn’t mean I’ve turned my back on the stock; we just took advantage of what the market gave us.

As conditions change, we change our NICILytics Rating for cannabis companies, which you can find in our NICILytics database. The database contains the latest report on Curaleaf and nearly 200 more publicly-traded cannabis stocks. We call it “The Vault,” and investors like you looking to be as informed about cannabis stocks as possible are free to find out more about it here.

And, to learn more about CBD and the many other cannabinoids found in the cannabis plant, read our comprehensive primer on cannabinoids. After all, these are incredible compounds that make the “Year of CBD” possible in the first place.

Greg Miller
Executive Director, National Institute for Cannabis Investors

P.S. The CBD market is growing at warp speed. Analysts are even projecting it to grow more than 15 times faster than the cannabis industry as a whole by the end of the year. And if you play your cards right, you could pocket gains up to 1,000% – because as a result of this landmark event, experts predict sales in the hemp CBD market will skyrocket to $22 billion by 2022. That’s why we’ve identified two companies with the potential to turn a small investment into one-in-a-lifetime gains. Find more information here.


Comments

6 responses to “A Bump in the Road to Cannabis Scale”

  1. Curaleaf is and will be the preeminent cannabis company of the world, curaleaf will also have the top CBD brand in the world. Canopy and acreage are falling way behind curaleaf.

  2. I thought about the land lots but it wasn’t recommended and I backed out.
    Now I am desperately looking for the number one Cannabis stock name so I can buy it ASAP and hopefully get those USA monthly checks. If someone can point me to the right area, I would be ecstatic!! Please ??

  3. What is happening? I gain a few cents and then lose a few cents. So far not much increase on all the impales you recommended. What can I do to improve?

  4. I bought POTC about 8 months ago along with some other pot stocks hoping my investment would grow the longer I held onto them? So far however I have lost 1/2 of what I invested. Do you have to keep trading those penny stock on a regular bases,to make them grow?

    • Shoot, I started investing in cannabis in 2016. Started with NICI about 1 year ago. Every time I buy a stock it drops. Sometimes 50%. I am now at 14K with an initial investment of 20K. Three years and I don’t think the money is going to be in rec pot stocks. It’s in pharmaceuticals. Only had a few recs from this outfit. The rest has been pretty much trash. Still in a holding pattern and don’t intend to buy ANYTHING else for a long while. I hope there’s light at the end of this tunnel. I’m only hanging on in hopes I can recoup some of my losses.

  5. Yes, I am curious to know what Jerry Maloy said. Do we have to keep trading those penny stocks. I see the recommendations but is this the way we need to invest? What they mentioned about IPO’s how do we make money? Where do we get information on what to invest on CBD???

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