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Friends,
After showing strength into the new year that was followed by further rallying, the New Cannabis Ventures Global Cannabis Stock Index plunged yesterday and is now down 0.3% in 2025. After declining so much in the past almost four years, the drop doesn’t even show yet on the longer-term chart:
The weakness on 1/8 occurred after Amplify announced it was shutting down its U.S. Alternative Harvest ETF (NYSE Arca: MJUS). This fund was purchased less than a year ago from ETF Managers Group, along with 13 other funds, including Alternative Harvest ETF (NYSE Arca: MJ). Amplify already owned a cannabis fund, the Seymour Cannabis ETF (NYSE Arca: CNBS).
The MJUS ETF currently has 81.15 million shares worth about $66 million, of which only 100K traded yesterday on the news. The Amplify ETF MJ owns 76.59 million of the MJUS shares (94%). MJUS holds mainly MSOs, with four of them in excess of 10% of the ETF:
MJUS is very similar to AdvisorShares Pure US Cannabis ETF (NYSE Arca: MSOS), which I recently suggested could bounce. My optimism after being so pessimistic about it was premature, as it did post a new all-time low, but that low held yesterday. MJUS has better diversification than MSOS, but it is much smaller and less liquid as well. The two funds have performed similarly over the past year:
In August of 2023, I wrote about why cannabis ETFs aren’t very good. The article was published days ahead of the news hitting that the Department of Health & Human Services had recommended that the DEA reschedule cannabis. In that article, I compared CNBS, MJ and MSOS. While they bounced right after that article, all are now down a lot since then despite the good news in April that the DEA had formally recommended rescheduling:
I continue to view cannabis ETFs as a poor way to invest in cannabis, though they are the only option for those who want to invest in U.S. cannabis but can’t trade OTC stocks and don’t want to buy ancillary stocks. The diversification at MJ and MSOS is terrible. I think Tim Seymour is a good person and is capable of managing a fund, but he has held dome stocks that I don’t think are the best ones to own in CNBS, which is tiny at only $12.8 million in net assets.
What the MJUS liquidation will do to cannabis stocks is not clear. On the one hand, if the shares it holds are sold into the market, the stocks in the ETF will be pressured. The amount of shares is high relative to the daily trading. On the other hand, if the largest holder, MJ, exchanges it shares, which are 94% of the outstanding shares, for the holdings, the impact will be minimal.
MSOs are very beaten up and seem like a great value. I currently hold five names in my model portfolio at 420 Investor that are MSOs that represent 50% of the holdings. Of course, if 280E taxation remains in place, these stocks will likely suffer greatly. The rescheduling by the DEA, which remains in process, would wipe out 280E, but it is not yet a done deal.
So, another cannabis ETF is exiting. It could have a short-term impact on the market later this month and already did have a big one yesterday. For now, I see Amplify’s exit as nothing more than perhaps another sign of their bad timing in the cannabis space.
Sincerely,
Alan
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