New SEC Filings Reveal Major Risks In Cannabis ETFs Following Recent Volatility — But There’s Still Room for Optimism
Cannabis investors have been navigating a complex and volatile market, with two major ETFs, the AdvisorShares Pure US Cannabis ETF (NYSE:MSOS) and its leveraged counterpart, the AdvisorShares MSOS 2x Daily ETF (NYSE:MSOX), at the center of the storm.
Both ETFs have faced considerable headwinds in the form of regulatory uncertainty and underperforming stocks in the cannabis space, new SEC filings show. Yet the potential for regulatory reform — particularly the rescheduling of cannabis under federal law — along with emerging pro-cannabis political momentum, offers a glimpse of hope that could reinvigorate these funds and the broader market.
Closer Look At MSOS, MSOX: Performance And Market Pressures
In recent regulatory filings for MSOS and MSOX, we see a mixed picture of the ETFs’ positions and struggles. MSOS, which tracks a diverse range of U.S.-based cannabis companies, is facing significant pressure due to the prolonged regulatory gridlock in the U.S. and the economic downturn that has weighed heavily on growth-oriented sectors like cannabis.
The filings reveal the ETF’s holdings in prominent cannabis companies such as Green Thumb Industries (OTC:GTBIF), Verano Holdings Corp (OTC:VRNOF) and Trulieve Cannabis Corp (OTC:TCNNF). These stocks have shown both potential and volatility, yet have been unable to escape the broader downturn in the cannabis market. MSOS reported a 1.48% exposure to Green Thumb Industries, one of the most stable multi-state operators (MSOs), but the sector’s struggles have prevented these assets from delivering consistent gains.
MSOX, the leveraged counterpart of MSOS, is built for more aggressive investors seeking amplified returns. This strategy also means amplified risk, which has manifested in recent performance. The fund’s investments in total return swaps involving stocks like 4Front Ventures Corp (OTC:FFNTF) and Verano Holdings have caused large swings in its value, with substantial losses that haven’t been realized yet, as detailed in the filings. As the cannabis sector struggles, leveraged ETFs like MSOX have been particularly vulnerable to magnified losses.
Structural And Liquidity Challenges In Cannabis ETFs
The filings also shed light on some of the structural …