Cannabis Central: Only 2 ETFs Provide Exclusive Exposure To U.S. Marijuana Multi-State Operators

TM Editors' Note; This article discusses one or more penny stocks and/or microcaps. Such stocks are readily manipulated; do your own careful due diligence.

While marijuana cultivation is legal at the state level in 33 American states, it remains federally illegal, making it impossible for U.S. companies to have their securities listed on any U.S. stock exchange so many such companies (referred to as multi-state operators or MSOs) are listing their stocks on Canadian stock exchanges where such listings are legal to take advantage of full capital markets support. 

Currently, the CSE (Canadian Securities Exchange) remains the undisputed leader in U.S. pot listings with about 65 such companies trading on that exchange but many new listings are occurring on a relatively new Canadian exchange because:

  • The TSX (incl. the TSX-V)
    • won’t allow any issuers to participate in the U.S. market due to the risk factor associated with cannabis companies that remain technically illegal at the federal level.
  • The CSE
    • can't list ETFs due to its status as a venture exchange.

The relatively new (2015) Canadian exchange that has come to the rescue of these MSOs is:

  • The NEO
    • which allows listings of companies operating in the U.S. cannabis market as long they acknowledge the risks they are exposed to in their prospectus
    • and, in doing so, provides an easier pathway to a potential listing on the New York Stock Exchange or Nasdaq if U.S. laws change because its listing requirements are closer to those of the big boards.

The following 2 ETFs invest exclusively in these MSOs:

1. the Horizons US Marijuana Index ETF (NEO: HMUS)

2. the Evolve US Marijuana ETF (NEO:USMJ)

  • This ETF is the world's 1st ETF to actively invest in a diversified mix of 43 companies that are involved in the U.S. marijuana industry where state and local laws permit such activities.
  • Go here for a list of the ETF constituents and the % weight of each constituent in the index.
  • The index has a management fee of 0.75%.

Why You Should Be Interested In The Burgeoning U.S. Cannabis Market

Data company A.C. Nielson has crunched the numbers and estimates that:

  • total U.S. sales of all legal cannabis reached $8 billion in 2018
  • and will reach $41 billion by 2025 as more and more states legalize cannabis for medical and recreational purposes.

Just think what that will mean for those companies in the forefront of this market when all 50 states have finally legalized the sale of medical and recreational cannabis. Now is the time to do your research and consider investing in those stocks (or, better yet, either of the ETFs mentioned above) that you think will generate the greatest returns.

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Craig Richards 4 years ago Member's comment

Great as always, Lorimer.