OUR 9TH YEAR OF PROVIDING PROPRIETARY CAPITAL MARKETS INTELLIGENCE ON THE CANNABIS / HEMP / PSYCHEDELIC SECTORS
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Chart of the Week
Chart of the Week
The Viridian Capital Chart of the Week highlights key investment, valuation and M&A trends taken from that week’s Deal Tracker that we believe are impactful for investors, companies and acquirers.
Week ended 02/16/2024
Viridian Capital Chart of the Week: A Dramatic Demonstration of Cannabis Illiquidity – The MJUS ETF Rebalancing
- Cannabis Stocks have been trending downward for two weeks, but the MJUS ETF rebalancing efforts gave some of them an additional shove.
- The Amplify U.S. Alternative Harvest ETF is an actively managed ETF that seeks long-term capital growth through investing in the securities of U.S. Cannabis Companies. The ETF is small relative to the better-known MSOS ETF at about 14% of the net assets, but despite its smaller size, the MJUS had a dramatic impact on Cannabis stocks over the last two weeks.
- The blue line shows the percentage of the total volume in the stock that was accounted for by MJUS trading. Negative numbers indicate selling, while positive numbers show purchases. The orange line shows each stock’s percentage gain or loss over the period.
- The MJUS accounted for between 0.3% and 23% of the stock volume during the period.
- Other technical and fundamental factors were at play during the period. For example, AYR stock was bound to be impacted by the completion of its debt exchange and new capital raise, increasing the share count by around 35M, not counting in-the-money warrants.
- The correlation of .67 between the MJUS trading activity and the stock price changes is statistically significant and somewhat scary.
- The rebalancing proves a couple of points about cannabis investing. Rumors (like last week’s imminent DEA announcement rumor) and technical events like the ETF portfolio rebalancing can have outsized impacts on the immature and illiquid cannabis space. Nimble and well-funded investors may be able to trade these dislocations advantageously. However, most cannabis investors should avoid the temptation to look at the share prices every day, lest they be subject to motion sickness.
