The AusCann Group Holdings Ltd (ASX: AC8) share price is down 4.4% to 33 cents today and is now down around 80% over the past year as this former media darling finally meets financial reality.
I warned multiple times over the past 18 months that this business looked way overvalued with many common red flags I regularly see across the spec sector where a company is long on promise, but short on financial delivery.
Just a few of the warnings signs around this business include how it appeared largely setup to take advantages of foreseeable regulatory changes to the laws around the cultivation, export, and permissible usages of medicinal cannabis in Australia.
Its former CEO (who has now left the business) also regularly featured in the media taking about the company's huge potential even though it had no sales revenue to speak of, with the potential now seemingly not big enough for her to stick around.
The lack of sales revenue shouldn't come as a surprise to even the most amateur share market speculator as it has no existing products and just a bunch of strategies or stories as to how will it spend its cash balance 'developing' medicinal cannabis products and cannabis supply channels.
Unfortunately, anyone foolish enough to ignore my warnings on this story is now likely sitting on huge losses as the stock has seen even heavier selling since the release from escrow on February 3 2019 of around 140 million shares, and options execrable at 20 cents per share.
Since then we've seen the stock consistently fall on heavy selling from a price of 61 cents on February 1 to 33 cents today. Another red flag as if it were needed.
Even at 33 cents the company still have a market value of $102 million based on 309 million shares on issue, although I would not value it at much more than its cash pile of $41 million as at December 31 2018.
Unfortunately at the speculative end of the share market, fools and their money are easily separated and I'd suggest avoiding other pot stocks in the sector that have little to no revenue.
This is just common sense, as serious share market investors buy companies with actual products, profits and revenues.
Just by following this one simple rule you're likely to avoid painful financial losses.
Or if you don't have the time or willpower to identify individual shares worth owning I'd buy an index fund to track the S&P/ ASX200 Index of leading companies such as Blackrock's Australian Share Fund (ASX: IOZ) or Betashares' Nasdaq Tracking (ASX: NQD) exchange traded fund.
