Big Redemptions at Cannabis ETF MSOS
I no longer focus on the cannabis stocks, but that doesn’t mean I don’t take a look. The very large ETF in the sector by AdvisorShares, MSOS, which ended at $4.34 on Friday with a NAV of $4.33 per share, suffered a large drop in shares last week, with the amount outstanding declining by 2.4% to 188.665 million. This means that MSOS, which has declined in price by 8%, has seen a drop in the shares outstanding by 4% year-to-date. Of course, the shares outstanding have soared over the past few years:
Since the end of 2023, shares outstanding at MSOS have increased by 118% and by 44% since the end of 2024. The big run-up in 2025 was related to the cannabis rescheduling that took place and is in the process of taking place.
MSOS used to own only OTC-listed stocks, but with medical cannabis rescheduled earlier this year, several trade on the NYSE, including Glass House Brands (GLAS) and Trulieve (TRLV). Many others are preparing to list there, but it will likely require adult-use cannabis to be rescheduled.
Medical cannabis was rescheduled by the federal government from Schedule 1 to Schedule 3 in April. Many have expected that it would be rescheduled as well for the much-larger adult-use cannabis, but this is not clear. It may, and it may not.
The soaring share-count has been one sign of the interest in MSOS, but the soaring price has been another. Cannabis stocks were hammered when the federal elections took place in 2024, and this was for two reasons. First, many were expecting Florida voters to pass the ballot initiative for the state to move from just medical cannabis to include adult-use cannabis as well. While the majority of voters did vote to do so, the initiative failed to get the 60% necessary to make the change. The second issue was that President Trump was reelected. This was the former President who had appointed Jeff Sessions as District Attorney, which was a disaster.
So, American cannabis stocks were hammered in late 2024. Looking at MSOS from the end of 2023 to the end of 2024, the ETF dropped 48%. It is higher now, but it only briefly traded above where it closed on Election Day in 2024, $6.87:
At $4.28, MSOS is down today by 1.5% and down a lot from where it was just a few weeks ago, but it is more than double the all-time low it set in early 2024.
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With a falling share price and a decreasing number of shares outstanding, the market cap is declining. Still, at $816 million as of Friday, MSOS is pretty large. The ETF lists its holdings daily, and things don’t change very much. I have been pointing to the extreme concentration for a while, and the same three names that have been such a large part of the ETF remain so now:
Trulieve, Curaleaf and Green Thumb Industries represent a total of 79.7% of the ETF. This does not correspond to their market caps or to their market shares.
While the ETF holds 19 stocks, 10 of them are less than 1% of MSOS. Half of these are less than 0.01%! Six months ago, MSOS had 7 names that were 5% or more (now 4). Looking at these 7 stocks and comparing them to the 9.2% decline currently in MSOS, two are up and the rest are down more than MSOS:
The stocks are ordered by their ranking in April. The very largest two have increased, while the smaller ones have all decreased. One that really stands out is Glass House Brands (GLAS), as it is on the NYSE. I reviewed the stock at Seeking Alpha negatively in December when it was at $9.40. I had written Get Out of Glass House Brands in November on my personal blog when it had been lower. It’s lower now!
While Trulieve, the largest holding of MSOS, is up year-to-date, MSOS has reduced its investment. Six months ago, MSOS controlled 27.66 million shares, and it now controls 25.55 million shares. This is below the year-end level of 26.61 million shares too. Village Farms (VFF), which is oddly included, as it is not a U.S. cannabis operator at all, has seen its shares plunge by a lot more.
There is not much to sell for the ETF if it gets hit with further redemptions than its three large holdings that total amost 80% of the fund. For investors who want to own cannabis stocks, there are lots of other ideas than MSOS. First, there are other types of cannabis stocks, like Canadian LPs. Second, those who want to invest in American cannabis operators can do so directly, if able. MSOS is extremely concentrated and is seeing its shared redeemed. Be careful!
