NEW YORK (TheStreet) -- These stocks are hoping to ride the green rush of marijuana trading following the recent push to legalize marijuana, but investors need to be aware that many are not as green as they seem. These penny pot stocks have very similar stories.
Most began life in a different line of work and only recently jumped into cannabis. It's a hot trend and many investors don't bother to look any further than the name. Some of these companies are serial name changers. They frequently issue shares in the hundreds of millions. They tend to pay bills and settle debts with stock. They have little cash on hand. Some don't even have a marijuana product yet, but investors don't care, as these stocks are rapidly approaching bubble heights.
Take Rapid Fire Marketing, for example. This less than a penny stock is eyeing the dry vaporizer market. Dry vaporizers are a favorite among pot smokers as the heat vaporizes the pot and consumers can smoke without ashes and smell. The company, however, touts a dry vaporizer prototype on its Web site, promising an "update on start of production coming as soon as we have it." Rapid Fire also sells vaporizers for oils and extracts on the Cannacig.com Web site. The company's last quarter only booked gross profits of $2,000. Typical of many of these penny stock firms, it issues millions of shares in order to pay its bills. In the nine months ending September 2013, Rapid Fire issued 780,000,000 shares and at the same time only has $1,812 cash. Yet the stock has gone from less than half a cent to half a cent. Now these aren't big numbers, but they are big percentages. Investor Relations for Rapid Fire said the company expects to launch the dry product vaporizer before the end of the current quarter, saying it's on the front burner.