Cannabis stocks recently took a nosedive, but the MJUS ETF rebalancing gave them an extra shove downhill.
The Amplify U.S. Alternative Harvest ETF MJUS is a small, actively managed ETF that hunts for long-term capital growth by investing in U.S. Cannabis Companies’ securities. Despite its size, the MJUS had a significant impact on Cannabis stocks over the last two weeks.
The blue line represents the percentage of the total stock volume accounted for by MJUS trading. Negative numbers denote selling, while positive numbers indicate purchases. The orange line illustrates each stock’s percentage gain or loss over the period.
MJUS was responsible for 0.3% to 23% of the stock volume during the period.
Other technical and fundamental factors were at play during this time. For example, AYR AYRWF stock was bound to be impacted by the completion of its debt exchange and new capital raise, increasing the share count by approximately 35M, without taking into account in-the-money warrants.
The correlation of .67 between the MJUS trading activity and the stock price changes is statistically significant and somewhat alarming.
This rebalancing demonstrates a couple of crucial points about cannabis investing. Rumors and technical events, such as ETF portfolio rebalancing, can have a disproportionate impact on the immature and illiquid cannabis space. Nimble and well-funded investors might exploit these dislocations advantageously. However, most cannabis investors should avoid checking share prices daily, lest they suffer from motion sickness.
The Viridian Capital Chart of the Week spotlights key investment, valuation, and M&A trends drawn from the Viridian Cannabis Deal Tracker.
The Viridian Cannabis Deal Tracker provides market intelligence that cannabis companies, investors, and acquirers use to make informed decisions about capital allocation and M&A strategy. The Deal Tracker is a proprietary information service that monitors capital raise and M&A activity in the legal cannabis, CBD, and psychedelics industries. Each week, the Tracker aggregates and analyzes all closed deals and segments them according to key metrics:
Deals by Industry Sector (to track the flow of capital and M&A Deals by one of 12 Sectors – from Cultivation to Brands to Software)
Deal Structure (Equity/Debt for Capital Raises, Cash/Stock/Earnout for M&A) Status of the company announcing the transaction (Public vs. Private)
Principals to the Transaction (Issuer/Investor/Lender/Acquirer) Key deal terms (Pricing and Valuation)
Key Deal Terms (Deal Size, Valuation, Pricing, Warrants, Cost of Capital)
Deals by Location of Issuer/Buyer/Seller (to Track the Flow of Capital and M&A Deals by State and Country)
Credit Ratings (Leverage and Liquidity Ratios)
Since its inception in 2015, the Viridian Cannabis Deal Tracker has tracked and analyzed more than 2,500 capital raises and 1,000 M&A transactions totaling over $50 billion in aggregate value.
The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.
