According to the Hemp Business Journal, the market for hemp-derived CBD products is expected to surpass $450 million by 2020. With the overall CBD market expected to surpass $2.1 billion by 2020, the legalization and availability of hemp-based products stands to attract the lion's share of the market as cannabis-based CBD products overcome the federally imposed hurdles. Many investors are looking to find ways to gain exposure to the industry while it's in its infancy.
Public vs. Private
As the hemp-derived CBD industry continues to grow at a rapid rate, new investment opportunities continue to present themselves. The two major avenues through which investors find hemp CBD investment opportunities are private placements and public listings.
The path to investing in a privately held CBD company is much different than that for investing in a publicly listed one. Where as shares of some hemp CBD companies cost less than $3 and can facilitate much smaller investments through an online brokerage account, 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.
The least complicated way for the average investor to get invested in a hemp CBD company is through the public markets.
When it comes to the U.S. public markets, most hemp CBD stocks are traded on the OTC markets. While 22nd Century Group Inc. (NYSE:XXII) is a NYSE-listed plant biotechnology company that is developing next generation industrial hemp plants that are high in CBD, the company's primary business takes place in the tobacco space.
When looking at OTC-listed hemp CBD stocks, it's important to note that OTC Markets has multiple tiers. Most people should probably stay away from Pink securities. as they are for "professional and sophisticated investors with a high risk-tolerance for trading companies with limited information available and limited regulatory oversight."
It's far safer to stick to securities on the OTCQX or OTCQB markets. OTCQX companies include some of the largest in the world, like Adidas and Roche. Looking through the OTCQB-listed companies however, we see fully reporting and audited companies like Applied Biosciences Corp. (OTC:APPB) which has both a human-focused hemp-derived CBD brand and even an animal-focused line of hemp-derived CBD products as well.
The best part about OTCQB stocks is that they are readily accessible through a traditional brokerage account like Ally Invest, E*Trade, and Fidelity.
With over 300 publicly traded marijuana stocks, it can be hard to filter through them all. As the legal marijuana industry is so new, so are many of the companies. Investing in companies with small market capitalizations is extremely speculative, so it's always a good idea to do your own due diligence and consult your financial advisor before making an investment decision.
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