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Marijuana Investments: Private Placements vs. Public Listings

August 8, 2017


As the marijuana industry continues to grow at a rapid rate, new investment opportunities continue to present themselves. Two major avenues through which investors find cannabis opportunities are private placements and public listings. Obviously, all of the companies listed in our marijuana stocks database are public, but most of them completed private placements at some point along the way. 


Related: What are Private Placements? 


Given how new the legal cannabis industry is, many potential investors in the space do not understand or are missing out on these opportunities.


The least complicated way for the average investor to get invested in a cannabis company is through the stock markets. For example, there's marijuana-related companies listed on the NYSE, but many more listed on stock exchanges in Canada such as the CSE and the TSX. Using a discount online stock broker like Ally Invest allows people to get involved for less than $5 per buy or sell order. These low commissions and convenience factors make publicly listed cannabis companies the easiest to access. 



Through the public markets, any investor can put in as much or as little as they desire and the cost per transaction is added on top. There is no period of time that the investor is required to hold their shares, and since the companies are widely owned and often traded, liquidity is less of a worry.


Related: Marijuana Stocks with the Highest Trading Volumes


The path to investing in a privately held cannabis company is much different than that for investing in a publicly listed cannabis company. Where as shares of some marijuana companies cost less than $1 and can facilitate much smaller investments, private companies usually impose minimums to participate in their financing rounds. Whether that's $2,500 or $25,000...the barrier to entry is far higher with private placement investments.


Related: Our Guide to Penny Stocks - Part 1


Beyond the minimum investment size, many private placement investments have additional restrictions regarding how long one must hold their stake before selling it off. In some cases, the companies that do private raises eventually become public. In these cases, early round investors are given a greater opportunity to liquidate their investment. Although these private placements require more money and a longer time-horizon, the returns can be substantial. 


Related: 11 Things to Know Before DOJA Goes Public


Be sure to subscribe to one or more of our free e-mail newsletters so you never miss an important cannabis stock update. Also, don't forget to connect with The Daily Marijuana Observer on social media via Facebook, Twitter, StockTwits, and Instagram.



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