How do you spot a psychedelics & cannabis Pump n' Dump?

Its not as hard you might think

Though illegal, milder forms of PnDs are common in emerging industries like psychedelics and cannabis. PnDs are a capital markets scourge that hurt the credibility of new industries, reduce capital flows to real businesses and lead to significant retail investor losses.  

In these quasi-legal schemes, early and privileged angel investors & VCs look to boost the price of a start-up's stock price by making greatly exaggerated product, ROI or market size claims.  These same investors then sell their positions after the hype has boosted the share price.
 
I’ve seen many pump in dumping start-ups. They are not difficult to spot if you know where to look:

·      The stock promoter is on their 3rd target sector in 5 years;
 
·      There is an instant team of founders & advisors with seemingly little skin in the game or prior history with the company;

·      The business is actively promoted with brash claims (i.e. the optics) with little substance (i.e. real value);

·      The cap table is full of of unproductive ‘dead equity’;
 
·      There are sweetheart preferences and rights for early investors & capital markets advisors;

Entrepreneurs and investors, beware

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