Tuesday , 17 September 2019


Cannabis Central: Only These 2 ETFs Provide Exposure to the U.S. Marijuana Sector

By Lorimer Wilson

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. That being the case, many U.S. based companies in the cannabis business (referred to as multi-state operators or MSOs) have embraced the recent opportunity to list their stocks on the NEO stock exchange to take advantage of full capital markets support. This article highlights 2 ETFs that provide exposure to this burgeoning market and the rationale for investing in them.

For now the CSE (Canadian Securities Exchange) remains the undisputed leader in U.S. pot listings, with about 65 such companies trading on the exchange, according to CEO Richard Carleton, but the NEO exchange is growing quickly.

Jos Schmitt, President and CEO of the NEO Exchange, says:

  • the exchange has begun accepting multi-state operators who manage marijuana assets in legal U.S. states to gain more attention from the market for the exchange which launched in 2015 and that
  • there is a lot of focus on U.S. marijuana firms and, as the U.S. continues to further liberalize its marijuana regulations, more investors will be looking to invest in companies with significant business operations in the U.S. market.
  • For more information, please visit: NEOstockexchange.com

The 2 ETFs referred to in the opening paragraph are:

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

  • This index is designed to provide passive exposure to a basket of 45 life science companies doing business in the U.S. marijuana and hemp industries 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 0.85%.
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 were they listed on the NEO Exchange?

  • 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 NEO
    • allows listings of companies operating in the U.S. cannabis market as long they acknowledge the risks they are exposed to in their prospectus. In addition, the NEO
    • offers a smoother 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.

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 legalize the sale of cannabis. Now is the time to do your research and invest in those stocks (or, better yet, either of the ETFs mentioned above) that you think will generate the greatest returns.

Editor’s Note:  A hyperlink to this article must be included in any re-posting to avoid copyright infringement.

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