The article below was first published on Nasdaq.com on JUL 8, 2020
Buzzn is a health and beauty shop based in Brooklyn, New York selling cannabidiol (CBD) pet products and wellness products. Their tagline is “Get Chill, Not High” as the CBD hemp extracts are not psychoactive.
That’s all well and good, but should you invest in Buzzn’s equity crowd offering? What is CBD used for, who is it for and how big is the market?
Buzzn Creates Safe CBD Products With Numerous Benefits
Before investing in Buzzn stock you should know what the products of the company are, and what is the market potential and analyze other financial and fundamental factors. The company was founded in 2016, having its headquarters in Brooklyn, New York. The team is made by Minchul An, Co-Founder & CEO, and Lisa Zhan-Monigan, Co-Founder & COO.
A report published on Harvard Medical School shows the medical benefits and uses of CBD:
“CBD is commonly used to address anxiety, and for patients who suffer through the misery of insomnia, studies suggest that CBD may help with both falling asleep and staying asleep.”
What’s more, Buzzn has a FAQ page answering important questions about its CBD pet and wellness products. “The CBD (Cannabidiol) is a non-psychoactive cannabinoid associated with numerous health and wellness benefits” containing 0.0% THC. This is the most important part that makes hemp CBD products made by Buzzn safe, regulated, and free of psychoactive effects. Further, it’s completely legal, rigorously tested and comes with a certificate of analysis for authenticity.
Buzzn Supports ESG Investing
What is ESG Investing? It’s an acronym for environmental, social and governance, and is a hallmark of sustainable-minded companies. According to the CFA Institute, “investors are increasingly applying these non-financial factors as part of their analysis process to identify material risks and growth opportunities.”
Socially responsible investing supports social-good purposes. Buzzn, with every pet product sale, gives a percentage to support Korean K9 Rescue, helping to ban the dog meat trade in South Korea.
Buzzn Stock Could Benefit from the CBD Market Growth
Investing in a stock with a fast-growing market is one of the most important fundamental factors to consider being a positive catalyst for future profits. A Grand View Research is optimistic for the global cannabidiol market:
“The global cannabidiol market was valued at USD 4.6 billion in 2018 and is expected to grow at a compound annual growth rate (CAGR) of 22.2% from 2019 to 2025. The demand for cannabidiol (CBD) for medical and wellness purposes is high due to its healing properties, which is the key factor driving the growth of the market. Moreover, growing product adoption and utilization owing to government approvals is a major factor anticipated to drive the demand for cannabidiol infused products.”
The Problem, the Products and the Business Model
Buzzn addresses the key problem of anxiety and stress not only for humans but also for our beloved pets. The vision of the company is to provide products that will help both humans and pets be happy and live a healthy life. All products are organic ones, toxin-free, and tested for purity providing test results.
The wellness products are only three, ranging from $69.95 for the Chill Mint and Orange Bliss up to $99.95 for the Super Powered Healing Balm. There are also three products for pets, ranging from $29.95 for Chill Bites to the most expensive product with a price of $64.99 for the Doggy Daze. I think that the line of products is limited for now, which could harm sales, but the company plans to expand the range of products in 2020.
Buzzn makes sales using retail, online and events channels, with most sales coming from the retail business activity. According to Buzzn the profit margin for all products sold via the retail channel is 65%.
The Risks of Investing in Buzzn Stock
While it is easy to buy the Buzzn products online without having to search for a physical store, investors need to act quickly (and smartly) to get in. Currently, there is an active Republic equity crowdfunding campaign for Buzzn. However, the minimum goal of funding has already been reached and oversubscribed by 138%.
You can still invest in Buzzn, with a minimum investment of $100. In return, you’ll receive a Crowd SAFE security with the company valuation set at $4 million.
There are a lot of risks to consider. One specific risk is the potential of the Crowd SAFE holder not getting back the return of his/her purchase amount in the event there is not enough liquidity and cash for the company. Another risk is that the investors may lose all or a significant part of their invested capital.
Should you decide to invest in Buzzn consider these risks carefully. Personally, being an animal lover, the idea of supporting the Korean K9 Rescue with investing or buying products made by Buzzn is a strong argument in favor of socially responsible investing.
Not focusing on the profit margin — which should be examined for its sustainability — the market growth is promising. But remember that equity crowdfunding investing is not suitable for everyone.
As of this writing, Stavros Georgiadis, CFA did not hold a position in any of the aforementioned securities.
Investing through equity and real estate crowdfunding or asset tokenization requires a high degree of risk tolerance. Despite what individual companies may promise, there’s always the chance of losing a portion, or the entirety, of your investment. These risks include:
1) Greater chance of failure
2) Risk of fraudulent activity
3) Lack of liquidity
4) Economic downturns
5) Dearth of investor education
Read more: Private Investing Risks
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.