Wall Street picks MSOs over Canada

2 mins read

Despite good news like New York legalization and the SAFE banking act advancing, the cannabis capital market haven’t rebounded all the way, reports MarketWatch.

In fact, actively managed cannabis ETFs have dropped between 29% and 35%. But a closer look shows that American multi-state operators (MSOs) haven’t suffered as much as Canadian weed stocks like Canopy and Aurora. That’s (partly) because analysts overwhelmingly favour MSOs over the big producers north of the border. 



But there’s a problem

It’s also because investing in MSOs isn’t as straightforward as jumping into GameStop. Federal criminalization of cannabis in the US means US producers can only list on Canadian exchanges. AND, Canadian federal legalization means Canadian companies are publicly listed on US exchanges.

While we’re starting to see cross-border licensing deals, Canada’s biggest companies can’t sell into the US, while MSOs like Trulieve and Curaleaf are expanding into the ever-increasing list of legal adult-use states.

But ETFs are getting creative

Those MSOs have been able to access US exchanges via ETFs like YOLO and MSOS, who hold “total return swaps” — buying derivatives that are valued by an MSO’s movement on Canadian exchanges. Yesterday, Amplify ETFs announced that their CNBS ETF can now also buy total return swaps for MSOs. (What could go wrong with Wall Street using phrases like “_____ _____ swap”.)

Wall Street’s MSO picks

Based in part by suggestions made by YOLO and MSOS portfolio manager Dan Ahrens, MarketWatch says the MSOs with the most “buy” ratings from analysts are: Curaleaf, Green Thumb Industries, Cresco Labs, Trulieve, Verano Holdings, TerrAscend, Columbia Care, Ayr Wellness and Harvest Health.

Bottom line: get ready for more volatility – but perhaps better performance from MSOs.

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