A Leading Cannabis ETF to Shut Down as Investor Interest Declines
A popular exchange-traded fund (ETF) focused on the cannabis industry has announced its decision to cease operations due to decreasing investor interest.
AdvisorShares, the largest manager of cannabis funds, revealed that its Poseidon Dynamic Cannabis ETF will have its last day of trading on August 25. The fund plans to liquidate its assets and distribute payments to shareholders on September 1, as mentioned on the fund’s official website.
Launched in November 2021 on the New York Stock Exchange, the Poseidon Dynamic Cannabis ETF experienced significant success during the pandemic-driven surge in cannabis sales. However, the waning investor sentiment towards the industry has led to its closure.
The cannabis sector, although legalized in nearly half of the US states for recreational use, continues to face federal restrictions. Classified as a Schedule I substance, along with heroin and LSD, cannabis companies struggle to access banking services and engage in interstate trade. Consequently, oversupply and falling prices have plagued many states.
The declining value of cannabis equities has deterred investors, causing a lack of capital inflow for the industry. Poseidon Investment Management, one of the earliest cannabis-focused hedge funds in the US, has witnessed its ETF lose approximately 74% of its value since inception, while the S&P 500 only experienced a 1.7% decline.
Furthermore, the value of the ETF has dropped by 65% in the past year and traded below $1 on Tuesday. Another cannabis fund managed by AdvisorShares, Pure US Cannabis ETF, also suffered a significant decline of around 60% during the same period.
Poseidon’s closure is the latest setback in an industry facing challenges from market dynamics and government policies. In recent months, a proposed $2 billion merger between cannabis operators Cresco Labs and Columbia Care fell through, and Mastercard announced its decision to prohibit cannabis transactions on its debit cards to comply with federal regulations, further isolating the industry from traditional banking.
