The Rise and Fall of Medbox

Earlier this week, WSJ/MarketWatch published a piece “How to Invest in Legalized Marijuana.” One of the suggested stocks mentioned was Medbox ($MDBX), a company that creates medical-marijuana dispensing machines:

For regular investors looking to get in on the action — and without having to actually grow or sell drugs — there are several small-cap stocks that stand to gain from marijuana’s growing acceptance. Medbox , an OTC stock with a $45 million market cap, for example, sells its patented dispensing machines to licensed medical-marijuana dispensaries. The machines, which dispense set doses of the drug, after verifying patients’ identities via fingerprint, could potentially be used in ordinary drugstores too, says Medbox founder Vincent Mehdizadeh. Based in Hollywood, Calif., the company already has 130 machines in the field, and it expects to install an additional 40 in the next quarter…

That article propelled the stock to a meteoric rise from roughly $4/share to a whopping $215/share in a matter of two days (thereby increasing Medbox’s market capitalization from $45 million at the start of the week to a staggering $2.3 billion by Friday). So much interest was expressed in the stock that company executives had to go on record to “dampen investor enthusiasm.” It seems to have worked: the stock traded in a wide range today, ultimately finishing at $20/share.

Pretty wild stuff.

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