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Ive been investing since 2006 before I went to college for economics. I've beaten the market since I've begun, and survived the financial crisis with little experience/training. Focus is mostly on long-term value stocks, but not afraid to venture out my zone when I see something interesting.
  • Dissecting The Forbes Press Release On Creative Edge Nutrition 37 comments
    Jan 23, 2014 3:12 PM | about stocks: FITX

    On December 30th, 2013 Karsten Struass wrote an

    "article" for Forbes, "Big Marijuana: Is it the Future?" This so-called article, which the title would make you believe is about the entire industry reads much more like a press release for the only company mentioned in the press release - I mean article - Creative Edge Nutrition (OTCPK:FITX) and its subsidiary CEN Biotech. Strauss, a staff writer for Forbes (as opposed to a contributor) did little to no digging or fact-checking, took the company's CEO, Bill Chaaban, at his word for everything, and then turned around and spewed Chaaban's sales pitch to the world via Forbes. Beware of a company that is capable of getting a credible? news agency to publish a non-credible article.

    The License (or lack there of)

    The first and largest example comes at the end of the second paragraph. Strauss writes that the company was "approved to grow" marijuana and seeds for the Canadian and export markets by Health Canada. This is simply not true, and even CEN Biotech's new website (it was just launched last week), says so. They have received a "ready-to-build" approval from Health Canada, and more than once on the same webpage it says they are still awaiting a drug producer license and cannot distribute anything to patients.

    A spokesperson from Health Canada, Sara Lauer said, "A company that receives a ready to build letter can not be considered approved," and goes on to say that a company cannot be approved until their production site is finished construction. So either Chaaban lied to Strauss about obtaining approval or he grossly misinterpreted what a ready to build letter means. Again, Creative Edge Nutrition is NOT permitted to do anything involving marijuana in Canada, except to build their production facility.

    The Economics

    Chaaban goes on to tell Strauss that the company will be doing "$100 million in sales, with a margin of 80%" Again Strauss failed to dig deeper, or even criticize the statement with common sense. Simple economics and any knowledge of commodities would tell you this is highly optimistic, and at least the 80% margin aspect is probably not true.

    First and easiest to see is any industry with 80% margins is going to attract a lot of competitors. With competition comes price wars. In Colorado an eighth of an ounce (a typical unit for measuring marijuana in the USA and Canada)started at about $50 when their medical marijuana program started. Days before legalization in Colorado, prices were closer to $25 an eighth. In less than 3 years the medical marijuana industry shrank by 40%. So maybe Creative Edge will have 80% margins, but not for long.

    A little harder to predict and extrapolate is the question of $100 million in sales a year. The current Canadian market only consists of approximately 40,000 customers, and Health Canada predicts close to 500,000 in 10 years, with a $1 billion market. If both Health Canada and Chaaban's predictions are true, Creative Edge would capture 10% of the market. There are already over 150 applications submitted to Health Canada, Strauss and Chaaban told us nothing as to why Creative Edge would be able to steal a huge chunk of the market from a large pack of hungry competitors. Also two companies have actually been permitted to grow and distribute already, and they will clearly have a first-mover's advantage. Chaaban might argue here that they have huge potential in the export market, so they wouldn't necessarily be taking 10% of the Canadian Market.

    The Reality

    Strauss goes on to talk about Creative Edge exporting to a number of countries, including "Uruguay, Israel, The Netherlands, Mexico, Columbia, Iran and North Korea." First I'd like to point out that not only did Strauss not fact-check, he did not spell check either. Columbia is not a country, it is a university that Strauss supposedly went to. Colombia is a country. Second is that not one of these countries has expressed interest in importing marijuana or seeds, and have enacted zero laws enabling this. Many of the countries do not even have a medical marijuana program.

    The Uruguayan government has already stated they want to grow their own marijuana whether for recreational purposes, so why wouldn't they try for "medical marijuana" (to which there is no real difference). Israel has its own robust medical marijuana industry, and a traditional medicine industry. The Netherlands, well we already know about them, the Dutch started this whole thing, so why import? Mexico is one of the biggest producers of marijuana in the world, same goes for Colombia. Then Iran and North Korea - umm - seriously where did that come from? I think there are some sanctions to get around there, not to mention that the governments there are not typically progressive on issues such as marijuana.

    The export markets Strauss claims Creative Edge will enter just don't make any sense. Only one place has been reported to express interest in importing medical marijuana, Denmark, and they weren't even mentioned in the Forbes article.

    The Possibilities

    It could be entirely possible that Strauss just completely botched the article on his own, without misguidance from Chaaban. I have been misquoted for the benefit of the story in the past. Reporters are human and make mistakes too.

    But if this was the case Chaaban should come out with a statement and a press release labeled as such, not labeled as a news story. And Forbes should come out with a correction, if they have any ethics.

    All of these things add up to beg the question was Strauss duped, lazy, or worst of all knowingly complicit in pumping Creative Edge Nutrition?

    The company's stock rose 300% in about a week. Trading volume went from non-existent to 200 million shares a day. This was all based off this one article and the misinformation that they were approved for business in Canada. The company could have issued a press release to clarify the misstatements in the article, but has instead refused comment. I'm going to use the duck test here and stay away from this stock. If it smells like a pump-and-dump, looks like a pump-and-dump, and sounds like one, then it probably is.

    Disclosure: I 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.

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

    Stocks: FITX
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Comments (37)
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  • Juicy
    , contributor
    Comments (2) | Send Message
     
    Did you even read the article? Here's your second paragraph, verbatim:

     

    Michigan-based nutritional supplement company, Creative Edge Nutrition, is on course to becoming the first U.S. company to be allowed to distribute medicinal marijuana in Canada, says CEO Bill Chaaban. In November the company was notified by Canada’s federal health department, Health Canada, that it has been issued a ‘ready to build’ letter for a facility* to grow, distribute, import and export medicinal marijuana and plant seeds through its Canadian subsidiary CEN Biotech. Once finished, Health Canada will inspect the site and decide whether to issue a permit to begin operation.

     

    for anyone who wants to actually read the Forbes article themselves can go to this link
    http://onforb.es/1iSMpFI
    23 Jan 2014, 04:49 PM Reply Like
  • TheScottMarket
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » Juicy, did you read the original Forbes "article" or just the one post-corrections?

     

    My article was supposed to go out a few weeks ago, but Seeking Alpha didn't like it. Strauss/Forbes fixed most of the errors after some prodding. The corrected version of Strauss's article is going to get much less play than the original. The original is almost month old at this point.

     

    The paragraph you quoted is actually just more meaningless crap spewed from Chaaban's mouth. I doubt Strauss asked Health Canada what a ready to build letter means (hint: not much). Hey they could be the next great-green-hope, but the original article released indicated otherwise.

     

    Do you really think they will export to any of those countries? And the Canadian market is tiny!
    23 Jan 2014, 08:04 PM Reply Like
  • Juicy
    , contributor
    Comments (2) | Send Message
     
    I was unaware of the time lapse between articles or the fact that there were corrections, my apologies. FITX is a pretty sketchy play IMO, but I could see them becoming a profitable company if they can effectively execute their grow.
    24 Jan 2014, 07:29 AM Reply Like
  • TheScottMarket
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » It is possible that they will be a leader in the industry, but I don't see it. There are 150 other applicants for a minuscule market. No other country has even suggested they want to import marijuana, beside a small group of people in Denmark (which wasn't mentioned in the article). Every other country mentioned is a major producer of marijuana (legal or otherwise) or is under tight economic sanctions (N. Korea). The fact that N. Korea was even mentioned in the article as a legitimate export country makes the whole thing seem like a joke.
    24 Jan 2014, 12:32 PM Reply Like
  • belgium
    , contributor
    Comments (1358) | Send Message
     
    "There are 150 other applicants for a minuscule market. "

     

    Well over 400.

     

    http://bit.ly/1nSPi7s
    21 Feb 2014, 07:08 AM Reply Like
  • TheScottMarket
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » Yeah that number has increased and Im sure continues to every day.
    25 Feb 2014, 01:16 PM Reply Like
  • william046
    , contributor
    Comments (11) | Send Message
     
    When is the article coming out with real information in Forbes.
    23 Jan 2014, 10:03 PM Reply Like
  • TheScottMarket
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » You can ask Strauss on the Forbes site if he will ever do a real article, but my guess would be never.
    24 Jan 2014, 12:33 PM Reply Like
  • dmcken
    , contributor
    Comments (33) | Send Message
     
    Bill made a statement less then a 3 days after release of the Forbes article via FB in regards to the ready to build letter not being approval and uploaded a diagram of how the process for approval goes. Did you fact check?? It was right there in front of you if you just went to wither Bilks FB page or the companies. Also, you infer a P&D scam won't aknowledging this company was 1 of 12 to be invited to present at ARCVIEW just yesterday??ill put it this way--if the investors at ARCVIEW find it legitimate enough to hear a presentation it's certainly a legitimate company--how do you leave that detail out??between this and glover not knowing the diff between o/s and a/s I'm having trouble trusting the SA contributors motivations in this sector.
    24 Jan 2014, 07:27 AM Reply Like
  • TheScottMarket
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » Well, since you can't short these companies I don't really have a motivation. Shit I'm not even getting paid by SA on this.

     

    No I don't usually fact check by going on Facebook. Chaaban should have gone on Forbes, not a fb account that nobody is going to check. Seriously FB is not fact-checking....why do I waste my time.
    24 Jan 2014, 12:06 PM Reply Like
  • TheScottMarket
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » Looking at their Facebook page is pretty funny. They should be careful about what they post there....a real company would not be talking about the stock on their fb page the way there are. Could get them into SEC trouble especially without a safe harbor statement or any legalese. There are a lot of rules pertaining to how you can advertise your stock, which they are doing on FB I might add. At least w the forbes article they can claim ignorance...
    24 Jan 2014, 12:26 PM Reply Like
  • TheScottMarket
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » His statement clarifying a ready to build letter wasn't posted untilJan 13th from what I can see? Also telling shareholders to "buy and hold" seems quite possibly illegal. Funny they are using some of the same tactics deployed by mina and mdbx. Especially the part where they say they are going to sue people on online forums! Yeah right. Have fun with that....
    24 Jan 2014, 12:42 PM Reply Like
  • User 11753391
    , contributor
    Comment (1) | Send Message
     
    FITX is a pink slip stock. Pink Slip stocks are not required to file with the SEC, and do not have to adhere to the same requirements as other stocks.
    19 Feb 2014, 01:06 PM Reply Like
  • TheScottMarket
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » You are correct, but that doesn't mean there isn't a rule about it. The SEC still has oversight, I think. I don't know, I'm not a securities lawyer...either way you would think he has better stuff to do than chat on fb. You know like inventing a time machine or whatever to get the 35 day grow cycle.
    20 Feb 2014, 07:41 PM Reply Like
  • whatever101
    , contributor
    Comments (4) | Send Message
     
    What are you talking about. You can short FITX, and most others.
    18 Apr 2014, 10:05 AM Reply Like
  • TheScottMarket
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » The only place I saw was on interactive brokers, and they wanted you to have $2.50 in margin or something ridiculous for each share. On a .10 stock, that's not worth it to me to tie up that much money. If you know of anywhere that doesn't require so much collateral let me know, and I'll gladly short some of these tickers.
    23 Apr 2014, 09:17 PM Reply Like
  • AlexSwiss
    , contributor
    Comments (7) | Send Message
     
    I appreciate your article on FITX, however assuming the current Canadian market would grow approximately to 100,000-200,000 customers in a couple of years and (low) average of 80$ (twice 1/8 ounce per month at 40$ each) per customer, the Canadian market could be worth 100-200M$, if FITX gets 20% of it, that's already 20-40M$ a year; Plus the fact that after the latest news about FED relaxing the legislation in US, FITX may be allowed to sell to the US market soon and reach indeed the 100M$ in a 2-5 years horizon.
    The CEO is optimistic indeed, but he that's the spirit to have considering the unrevealed mj market possibility
    24 Jan 2014, 07:30 AM Reply Like
  • TheScottMarket
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » Why would FITX get 20% of the market? Prairie Systems (the once monopoly over the Canadian market) is already up and operating, and I believe Tweed Inc (an actual article was written in Bloomberg) is also operating. There are over 150 other applicants....why would FITX beat up 140 off them? What makes them special? I have no idea. That's what the article should have covered.
    24 Jan 2014, 12:11 PM Reply Like
  • belgium
    , contributor
    Comments (1358) | Send Message
     
    http://yhoo.it/1nSPCDr

     

    450 applicants.
    21 Feb 2014, 07:11 AM Reply Like
  • TryingToMakeSenseOfItAll
    , contributor
    Comments (45) | Send Message
     
    DYODD people. Didnt anyone look into anyones background? Dont know who is playing who for the fool but look back to 2006/ 2007. They (not Bill, but his partners) were gonna do the same thing but it was a movie studio then. They simply pulled the old business plan and then hit "search" Movie Studio, "Replace" Pot farm.

     

    Id also suggest looking into "Edge Nutrition" and their canadian problems. No wonder they use the name "CREATIVE" Edge now.

     

    I Cant figure if Bill is in on it or the one being duped. DDYOD!! This won't end well.

     

    PS: why would anyone improve someone else's property with a 16mm facility? Has anyone seen the lease with the farmer? How long is it for? How much is the rent after they build the 16mm project? Has anyone asked that question? Where is the money even coming from for the buildout?
    24 Jan 2014, 09:04 AM Reply Like
  • TheScottMarket
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » Trying to make sense, yeah I was wondering where the $16M came from too....
    24 Jan 2014, 12:08 PM Reply Like
  • belgium
    , contributor
    Comments (1358) | Send Message
     
    " The Netherlands, well we already know about them, the Dutch started this whole thing, so why import?"

     

    The funny thing is that the Netherlands will be exporting to Canada:

     

    http://www.bedrocan.nl
    http://www.bedrocan.ca

     

    Licensed by Health Canada:

     

    http://bit.ly/1mulwux
    21 Feb 2014, 07:14 AM Reply Like
  • TheScottMarket
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » Interesting, I didn't pick up on that... I doubt they will be exporting actual product to Canada, but knowledge, technology, and genetics.
    25 Feb 2014, 01:20 PM Reply Like
  • belgium
    , contributor
    Comments (1358) | Send Message
     
    Actual product and even plants until the Canada location is fully setup to meet demand.
    25 Feb 2014, 01:44 PM Reply Like
  • TheScottMarket
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » Yeah I saw, pretty cool, and like you said funny considering Chaaban's claim...I'm surprised the Netherlands would allow it. I haven't been paying attention much to the Netherlands but their government was pretty down on cannabis last I heard (they were trying to shut down coffeeshops, and then they tried to ban foreigners from coffeeshops).

     

    I was looking at their website and they claim 7 harvests a year in the same space, which would give them about a 52 day grow cycle. Still better than most people but nowhere near 35 days.
    25 Feb 2014, 06:07 PM Reply Like
  • belgium
    , contributor
    Comments (1358) | Send Message
     
    "35 days"

     

    Complete joke...

     

    Bedrocan's 52 days is very impressive to say the least, but remember they are growing with scientists and universities since 1986.

     

    That Bill claims he can reduce that with another 17 days is just ridiculous and makes my BS-o-meter go full tilt.
    25 Feb 2014, 07:20 PM Reply Like
  • user21998591
    , contributor
    Comments (5) | Send Message
     
    I'm not going to say anything
    6 Apr 2014, 05:46 AM Reply Like
  • belgium
    , contributor
    Comments (1358) | Send Message
     
    you just did...
    6 Apr 2014, 06:26 AM Reply Like
  • user21998591
    , contributor
    Comments (5) | Send Message
     
    so many doubts just like on ihub for fitx
    6 Apr 2014, 01:13 PM Reply Like
  • TheScottMarket
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » don't worry my doubts extend beyond fitx
    8 Apr 2014, 08:12 PM Reply Like
  • whatever101
    , contributor
    Comments (4) | Send Message
     
    its a gamble. all stocks at this price are. what I do know is that some people and companies are going to make huge profits OFF of relaxed MMJ laws, and there is little doubt that the recreational side of all this will only accelerate the profitability of any large players.

     

    I am quite convinced this is not a pump/dump or anything close to fraud. I have done lots of research, and there are way to many players in this for it to be BS. An entire town is not going give a blessing to something that is total BS on the frontend. Will the projections Bill makes come true, only if the most optimistic outcomes occur probably. Do they have a good chance of being a leader in this? You bet.

     

    Every heard of Budwiser, Bacardi, Jack Daniels to name a very small sample. When alcohol prohibition ended, a lot of people made a lot of money. That is a fact. This is a plant being grown, with much less processing required than alcohol. will FITX make a pile of money? time will tell. to think they won't is as foolish as saying they will. So what if 450 companies want licenses and 7 are already growing. I am not aware of any that come close to 1.3 mil pounds a year, not to say they would definitely hit that number. It's speculative to be sure, but to say there are no rewards in this shows you have not done your research either, and ironic since you accuse others of this who buy the stock. my 2 cents. Also, if I had taken your advice, I wouldn't be up $300 K right now. here is to hoping your also full of crap and wrong. peace.
    17 Apr 2014, 06:24 PM Reply Like
  • TheScottMarket
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » whatever,

     

    What is fact? Where did this fallacy that Budweiser made a bunch of money in prohibition come from? They were around before prohibition and sold non-alcoholic beer during it. Same goes for JD, around before prohibition. Bacardi made some money selling to bootleggers I'm sure, but they were based out of Cuba at the time and could sell anywhere else in the world.

     

    So there is no fact there. Just like there's no facts (besides part of a building) surrounding fitx. Lol, the people that really made out after prohibition is NASCAR, but that's another story.

     

    Sound a little defensive though, scared fitx is going to get suspended like PHOT? Save that profit while you still can.

     

    Maybe they get a license, but no way they do half the other things they say. And yeah if they get a license you could make some more money....but I don't think they have a chance in hell of being a leader in this industry.
    17 Apr 2014, 07:24 PM Reply Like
  • whatever101
    , contributor
    Comments (4) | Send Message
     
    So your saying that NO business made money when Alcohol prohibition ended?? I'm not going to talk about things I don't definitely know about, but just because they existed before it doesn't mean that did not make a lot of money off of booze later? Actually I'm not worried at all that FITX will be suspended, but I was surprised that PHOT was, so take that for what it is.

     

    If I sound defensive, it is not intentional. Do you not think there is any big money to be made here with this Sea Change in MJ, or do you not buy into this will be a major business, with many winners and losers too I'm sure?? As for exporting, I would tend to agree with you it's too soon to know how that shakes out. Anyway, time will tell. There are certainly a lot of bashers and pumpers of this stock, no doubt. I don't consider myself either. I have sold some positions and would like to get in on the pharma end and maybe even vaperizor hardware, although not a fan of MCIG yet. Look, it is a bit of a bubble, but neither I nor you have any idea who will be the winners and losers. We each have a right to our opinion. If you don't think many millionaires are going to be made in the next year and after regarding MMJ and MJ, I don't see how your considered an expert in this area, but that is not meant to be a personal attack. Do you recommend any companies in this sector?? It's new, risky, and of course the financial will look bad, but to say there is no money in this to me seems very naïve, but I'm interested in what you have to say.
    18 Apr 2014, 12:43 AM Reply Like
  • TheScottMarket
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » Don't get me wrong I completely believe in this new industry, just not most of the public players, for now. There are so many shady operators and combine that with naive investors - investors who are likely either naive about the industry or about stocks in general - and you have a lot of over-hyped, over-priced stocks.

     

    You're right that nobody knows the winners or losers, and most of these companies don't have good financials...so leave those aside. How do you judge the value of a company in this sector then? Investing in fitx is just like roulette. Yeah you can make money betting on black, but what if fitx doesn't get a license in Canada, their stock is worthless, back down to $00.005.

     

    I've made money from the scams and the real companies, and I never said there was no money to be made in mj stocks. Sure if FITX gets approved there will be money to be made, but how much in the long-term? Again, who knows? But if they don't get one, their shareholders will be slaughtered.

     

    GWPH is real and I'm confident Epidiolex will get approved, but they could possibly be overvalued, again who knows? I liked them at $45, but would def be a seller close to $100 - in fact I sold covered calls on my GW shares today, strike at $100.

     

    Tweed seems real but the market is going to get crowded, sooner or later. They have slick marketing and PR without being bombastic like Chaaban. But who knows how big the market is and if Tweed is capable of growing? I ave had Maine medical weed (where their Master Growe came from) and it varies in quality quite drastically.

     

    Bedrocan is probably legit from the little I know about them. I will be looking into them for their IPO. They have the benefit of being able to import immediately, but they have a fairly limited selection. I wonder if they will grow out more strains in Canada?

     

    I never said I was an expert I just know that I know more about investing and more about this industry than probably 95% of the population. Combining those two makes for especially unique insight. But no I'm not an expert and I'm not perfect. I have been wrong before...once or twice.
    23 Apr 2014, 09:47 PM Reply Like
  • whatever101
    , contributor
    Comments (4) | Send Message
     
    Thanks for your insight. I do agree with most everything your said there. I also wonder where most of the prices in many of these stocks come from. It does remind me of the first dot com bubble in 2000, before all those companies that actually did nothing basically went away.

     

    The difference with FITX is that there is progress on the ground. They have also brought on some pretty impressive players that I don't think would join if they thought this was some kind scam/fraud in any way. Bill is Bill. But even he can't convince quality people on BS alone. Some stock holders on the other hand, it is true that is a different story. And yeah, I have no idea how the stock price relates to a company like this. It has held up pretty well in the sector, but not sure if that means anything or not.

     

    From what I read PHOT was suspended for massive insider trading? Is that your take on it? Would you touch it with a 10 foot pole now that it down so much today? I also notice a law suit will be pending.

     

    FITX may or may not be successful, but if it is a SCAM it sure is a good one. I for one hope it is not. I think it has a lot of potential, but for sure there are a lot pitfalls too. I certainly would not invest anything you could not afford to lose. I agree with you it's more a gamble than investment, but that could change sooner rather than later.

     

    Take care.
    25 Apr 2014, 09:25 PM Reply Like
  • Warren Puffet
    , contributor
    Comments (5) | Send Message
     
    Another glaring irregularity in this pinkie p$d scam are Chaaban's 144 filings. The revelation the CEO is selling the maximum amounts allowable by law coupled with the multiple misspellings of his name (Bahje, Bahige, Bill, Chaadan and Chaaban) are as red a flags as you can get. If it walks like a duck and quacks like a duck........
    29 Jun 2014, 11:50 AM Reply Like
  • TheScottMarket
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » Imagine the SA editors didn't even want to touch this topic, that's why it became an instablog, probably with more views than a lot of their articles...hopefully they have better sense on my upcoming article.
    28 Nov 2015, 03:38 PM Reply Like
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