General Cannabis: Changed Its Name But Not Its Practices

| About: General Cannabis (CANN)

Summary

General Cannabis was suspended in 2014 when it operated under the name Advanced Cannabis.

The CEO sold 25,000 shares the day before the OTC Markets Group reported a promotional campaign.

Cannabis stocks moved lower on average after this announcement.

It may have changed its name, but has it changed its practices?

Although it is too soon to say that the actions of General Cannabis Corporation (OTCQB:CANN) were intentional, the situation does not look good.

Yesterday was a rough day for the cannabis sector and this weakness accelerated after the OTC Markets reported that it was aware of certain promotional activities related to General Cannabis Corporation. This announcement, coupled with insider sales by CEO Robert Frichtel caused the shares to plunge more than 40%.

On October 12th, CEO Frichtel filed a Form 144 indicating his intent to sell 100,000 shares in accordance with Rule 144. On the same day, he sold 25,000 shares of common stock in the $3.64 to $4 range.

New Name, Same Problems

For those of you who do not know, General Cannabis previously operated under the name Advanced Cannabis and was one of the first comapnies to have its trading suspended by the SEC in March 2014 (view the letter issued by the SEC here).

The suspension in 2014 was very significant because CANN was one of the best known and most widely held cannabis stocks at the time. After the shares were suspended, market sentiment started to turn sour and the sector began to trade lower.

Less than two weeks after Advanced Cannabis had its trading suspended, the SEC suspended trading in Growlife (OTCPK:PHOT), also one of the most well-known and most widely held cannabis stocks.

Although the market has improved significantly since 2014, we are monitoring the sector ever more closely to see how this development impacts its recent rally.

A Flight to Quality

One of the impacts this development could have is that it could cause the market to focus more on quality companies that possess the following characteristics: 1) led by a management team with a proven track record and acts in the best interest of shareholders, 2) has a sound financial structure, 3) is current with its financial reporting, and 4) continues to execute on initiatives.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.