Back in December, Benzinga and Viridian Capital Advisors’ president Scott Greiper and vice president Harrison Phillips discussed the possibility of the firm launching a cannabis-focused ETF. At the time, they pointed out their interest in turning their Cannabis Stock Index into an exchange-traded fund but were waiting for the right moment: underlying liquidity of the component companies was not enough at the time.
“If the underlying companies don’t have sufficient liquidity, and you are either selling out of a position or adding a position, you are going to affect the value of the stock. So, the challenge in creating a cannabis index is that, up until the last three months, particularly the three months leading into the November elections and the state voting on cannabis legalization [...] we didn’t have the underlying liquidity that was sufficient to support a cannabis ETF,” Greiper explicated.
Two New Marijuana ETFs
Despite the fact that liquidity in the cannabis industry is rising consistently, levels still seem far from high. Nonetheless, a couple investment firms beg to differ.
About two months ago, Managers Group LLC and Horizons ETFs Management announced they had started the process to launch their cannabis ETFs. In early April, one of them debuted in the Toronto Stock Exchange, or TSX.
The Emerging AgroSphere ETF
Back in February, ETF Managers Group LLC (ETFMG) announced its intention to launch a cannabis-focused ETF: the Emerging AgroSphere ETF. The fund would not track weed per se, but instead, legal medical marijuana companies and other businesses in the medical cannabis supply chain.
“The Fund will not invest in any companies that are focused on serving the non-medical marijuana market in the United States, Canada or any other country unless and until such time as the production and sale of non-medical marijuana becomes legal in the United States, Canada or such other country, respectively,” the SEC filing read.
“This is the first public filing that we've seen of a cannabis ETF,” Viridian’s Harrison Phillips commented. “Having said this, it should be noted that this filing is far from being completed; there are still many spots where data need to be filled in. So, we don't expect this to be filed and approved any time soon.”
Some of the companies included in Solactive AG’s North American Medical Marijuana Index, the ETF’s underlying index, are:
- APHRIA INC COM NPV APHQF
- AURORA CANNABIS IN COM NPV ACBFF
- CANNAROYALTY CORP COM NPV CNNRF
- CANNIMED THERAPEUT COM NPV CMMDF
- CANOPY GROWTH CORP COM NPV TWMJF
- CRONOS GROUP INC COM NPV PRMCF
- EMBLEM CORP COM NPV EMMBF
- EMERALD HEALTH THE COM NPV TBQBF
- GW Pharmaceuticals PLC- ADR GWPH
- ICC INTL CANNABIS COM NPV ICCLF
- Insys Therapeutics Inc INSY
- MAPLE LEAF GREEN W COM NPV MGWFF
- ORGANIGRAM HLDGS I COM NPV OGRMF
- Scotts Miracle-Gro Co SMG
- SUPREME PHARMACEUT COM NPV SPRWF
- Zynerba Pharmaceuticals Inc ZYNE
The Horizons Medical Marijuana Life Sciences ETF
Although the first comer, ETFMG was not the only one that filed for a marijuana ETF. A few days later, Horizons ETFs Management filed a preliminary prospectus to list a medical marijuana ETF on the Toronto Stock Exchange (TSX). And, in the end, it was the first to actually go live, trading as the HORIZONS MEDICAL MARIJUANA LIFE SCI ETF HMMJ.
“While listing in Canada, the ETF will be concentrated in all of the North American market, like the Emerging AgroSphere ETF. In addition, both these ETFs will focus on the medical side of cannabis,” Phillips clarified.
Also notable is the fact that the fund has some minimum asset and liquidity thresholds set for companies to be eligible for inclusion.
Just like the Emerging AgroSphere ETF, the Horizons Medical Marijuana Life Sciences ETF will track Solactive AG’s North American Medical Marijuana Index.
Companies in the Horizons ETF as of April 12 were:
- APHRIA INC.
- AURORA CANNABIS INC.
- CANNIMED THERAPEUTICS INC.
- CANOPY GROWTH CORPORATION
- CRONOS GROUP INC.
- EMBLEM CORP
- EMERALD HEALTH THERAPEUTICS INC.
- GW PHARMACEUTICALS PLC
- HYDROPOTHECARY COR COM NPV HYYDF
- ICC INTERNATIONAL CANNABIS CORPORATION
- INSYS THERAPEUTICS INC.
- ORGANIGRAM HOLDINGS INC
- SCOTTS MIRACLE-GRO COMPANY
- SUPREME PHARMACEUTICALS INC
- ZYNERBA PHARMACEUTICALS INC.
What To Do
Even though a cannabis ETF has already debuted, Viridian Capital Advisors still believes it’s too early for a publicly-traded marijuana fund, particularly if it has holdings concentrated in the U.S. “We still are of the school of thought that the liquidity in the U.S. publicly traded cannabis market isn't there yet,” Phillips concluded.
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© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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