Shares of Medbox Inc. soared 85 percent yesterday to $73.90, and have been on a wild ride today, trading as high as $93.50 and as low as $46.90. It seems investors got all stoked about the company's prospects selling vending machines with fingerprint readers to dispense marijuana, now that recreational pot is legal in two states, Colorado and Washington. Yesterday the company, which trades on the Pink Sheets, issued a news release saying "it has improved on its products for use in recreational and medical marijuana facilities." The day before that, it issued a news release to tout the appearance of its chief executive officer, Bruce Bedrick, on CNBC.
There hasn't been much else to explain why Medbox's stock market value suddenly topped $1 billion this week. As recently as Dec. 26, before Colorado's new law took effect, the stock was trading for about $10. Nor does there seem to be much basis for believing the company should be worth so much now. Medbox had net income of about $23,000 on sales of $2.9 million during the six months ended June 30, according to a prospectus it filed with the Securities and Exchange Commission, which it has since withdrawn.
Medbox, based in West Hollywood, California, doesn't make its own machines. It contracts with another company to manufacture them instead. Surely other companies with greater resources could develop competing products if states around the country decided it was OK to start selling pot from vending machines. (Everywhere I know of, you can't even buy beer from a vending machine.)
As for the valuation, it simply isn't rational. To get a sense for the potential market size here, consider Crane Co., based in Stamford, Connecticut, which has a division that is the largest vending-machine manufacturer in the country. Crane has about a $3.9 billion stock-market value, and its revenue and earnings for the last four quarters were $2.5 billion and $215 million, respectively. Only a small portion of Crane's business comes from selling vending machines, including those that dispense food, snacks and beverages: The total for 2012 was about $207 million of sales and a $12 million operating profit.
Somehow I doubt the country will have more marijuana vending machines than soda machines anytime soon. A Crane spokesman, Richard Koch, said the company has no plans to make vending machines for marijuana. "Our intention is to remain in our core business," he said.
While there are countless puns to make about this company, one thing is clear about Medbox shares: the stock market has lost touch with reality.
(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.)