Marijuana stock IPO goes up in smoke

Will recreational marijuana soon be legal nationwide?
Will recreational marijuana soon be legal nationwide?

The New York Stock Exchange has gone to pot.

A company named Innovative Industrial Properties (IIPR), a real estate investment trust that plans to buy buildings and lease them to growers of medical marijuana, went public on the venerable NYSE Thursday morning.

The stock wasn't exactly lighting up Wall Street though. (Sorry.) The shares priced at $20 and only went as high (sorry, again) as $20.52 before finishing the day down more than 4%.

Innovative Industrial Properties is one of just a few companies related to the business of cannabis that actually trades on a major exchange, though.

So its IPO, which had been pushed back a couple of times and also had the size of the deal cut, is still an achievement in of itself.

There is a British-based drug company called GW Pharmaceuticals (GWPH) that is listed in the Nasdaq.

It makes a cannabis-based drug to treat epilepsy that has had successful clinical trial results. GW Pharmaceuticals is still waiting for FDA approval, but investors have high hopes. The stock is up more than 55% this year.

But GW Pharmaceuticals and Innovative Industrial Properties are the exceptions, not the rule.

Most marijuana stocks trade on so-called "over the counter" or "bulletin board" exchanges -- where penny stocks that can often be manipulated by pump and dump traders call home. And the pot stocks listed there tend to have goofy names and ticker symbols.

Related: Market for legal pot could pass $20 billion

There's a company called Weed (BUDZ) for example. Its ticker is BUDZ. The ticker for the aptly named Medical Marijuana (MJNA) is MJNA. Another stock is Hemp (HEMP) -- which also happens to be its ticker. There's even a company called GrowLife (PHOT).

And I'd be remiss if I didn't mention the penny stock named Pineapple Express (PNPL). Its ticker is PNPL. No word on whether or not Seth Rogen and James Franco are investors.

But Innovative Industrial Properties hopes to set itself apart from some of these quirkier companies. It plans to use the $67 million in proceeds it raised from the IPO to buy up properties in states where it is legal to cultivate medical marijuana.

According to its IPO filing, the company has an agreement to buy a 127,000 square-foot property with 37 acres of land in the town of Montgomery, New York for $30 million.

Innovative Industrial Properties bought the land from a company called PharmaCann and will lease the property back to PharmaCann, which has a license from New York State to legally grow and dispense medical marijuana.

Related: Scotts Miracle Gro looking to cash in on marijuana business

But this is the only property that the company currently has a deal to buy. Innovative Industrial Properties, which was just founded in June of this year, also has no revenue or profits yet.

The company hopes to purchase more properties in other states where medical marijuana is legal, such as California, Massachusetts and Oregon.

Still, the fact that medical marijuana -- as well as recreational use -- continues to be illegal on a federal level is a major risk for the company. That's likely one of the main reasons why the stock didn't do that well Thursday.

Investors seem to be worried that Innovative Industrial Properties will pull a Cheech and Chong and go up in smoke.

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