Avoid Namaste (TSXV:N) Stock at All Costs

A once promising marijuana company, Namaste Technologies Inc. (TSXV:N) is a stock that you should now avoid at all costs.

| More on:
Red siren flashing

Image source: Getty Images.

Since the widespread legalization of cannabis, 2019 has been a promising year for the budding weed industry. Dubbed as “Cannabusinesses,” some producers of legal marijuana have performed surprisingly well. But you must understand that there are some bad apples in the bunch. For every Canopy Growth, there are several more companies that could lose you a lot of money.

Amid the recent downtrend in the market, a number of cannabis stocks are potentially selling at a discount. In light of the current situation, it has become clear that the weed industry is gearing up for the next wave of volatility. This is likely to affect both the major and minor players of the industry.

Considering that the controversial weed industry was illegal, the transition to a completely legalized industry is not something that can be expected to happen smoothly. The recent scandals, such as CannTrust illegally growing cannabis, have caused plenty of stocks in the marijuana sector to simmer.

A marijuana company you need to avoid

Namaste Technologies (TSXV:N) seemed like the company to promise an online cannabis platform that could cater to the needs of the increasingly massive cannabis industry. The reality of the situation is far away from the potential the company had.

The cannabis-centred e-commerce technology company fired its CEO, Sean Dollinger, earlier this year, following Citron Research’s report that put a sizable dent in the share price of Namaste. The company was accused of making fake claims of a Nasdaq listing in order to get investors to buy stock. The company’s board sprang into action to form a special committee to investigate the claims.

The result of the committee’s investigation was that one of the accusations made against the company did have merits, with the wrongdoing exposed at the CEO level. The internal investigation found that Sean Dollinger had committed securities fraud.

He was effectively fired for breaches of fiduciary duty, and evidence of self-dealing regarding the sale and the subsequent transactions of Namaste’s U.S. subsidiary Dolliger Enterprises. Dollinger and the head of Namaste Technologies’s head of marketing David Hughes had a beneficial interest in the subsidiary, and there was clearly a conflict of interest.

Namaste stock remains in trouble

Still attempting to repair the investor trust Namaste has broken due to its internal management issues and a dishonest CEO, the company appointed an Interim CEO Meni Morim to help the company get back on track. While Namaste Technologies is trying to take advantage of two rapidly growing industries of e-commerce and weed, the company has still more questions about its future than it has solutions. It is safe to say that you should avoid the stock at all costs.

A fallen star

With some of the equities in the marijuana industry falling as much as 20% in the past month, you need to be selective when it comes to the weed stocks to invest in. With allegations of fraud and a plummeting stock price, Namaste Technologies seems to be out of the question.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in the companies mentioned.

More on Cannabis Stocks

Worker tags plants at an industrial cannabis operation
Cannabis Stocks

Can Canopy Growth Stock Finally Recover in 2024?

Down 98% from all-time highs, Canopy Growth remains a high-risk investment in 2024 given its weak fundamentals.

Read more »

A close up image of Canadian $20 Dollar bills
Tech Stocks

3 No-Brainer Stocks to Buy With $20 Right Now

These three stocks are easy buys for those who don't have all that much to spend, and want long-term growth…

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Slow Burn: Is Aurora Cannabis Finally a Good Buy in June?

One of the benefits of choosing from some of the most beaten-down market segments like cannabis is that even a…

Read more »

Caution, careful
Cannabis Stocks

I Wouldn’t Touch This TSX Stock With a 60-Foot Pole

I wouldn't touch Canopy Growth Corp (TSX:WEED) stock with a 60-foot pole.

Read more »

edit Cannabis leaves of a plant on a dark background
Cannabis Stocks

Why This Little-Known Cannabis Stock Could Double in 2024

This cannabis stock has already doubled this year since 52-week lows and could easily rise that much once more.

Read more »

Bad apple with good apples
Cannabis Stocks

1 TSX Stock I Wouldn’t Touch With a 420-Foot Pole

Down 87% from all-time highs, Cronos Group stock is a still a high-risk investment for long-term shareholders in 2024.

Read more »

A cannabis plant grows.
Cannabis Stocks

Canopy Growth: Buy, Sell, or Hold?

Canopy Growth (TSX:WEED) stock should make a killing on U.S. expansion, but investors will need to be very patient.

Read more »

Marijuana plant and cannabis oil bottles isolated
Energy Stocks

3 Canadian Value Stocks to Buy Right Now

Undervalued Canadian stocks such as Secure Energy should be part of your shopping list in May 2024.

Read more »