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Friends,
Last week, when I was pointing out how inflated the price of Curaleaf was, I mentioned that the ETF MSOS had a redemption 12/2, and, since then, it had another redemption on 12/4. For the week, the shares outstanding fell 1.3%. From their peak in mid-November, they have declined by 3.4%. Still, the shares have increased 39.6% year-to-date.
The ETF ended the week with a bit of leverage, as it was invested in cannabis stocks at 102.8% of its NAV, though sales were made this week. While Curaleaf did rally after my piece last week by 9.3% since then, MSOS actually fell 0.5% to $3.67. Looking at the 6 stocks that have an exposure of more than 5%, it is the only one up, with the rest declining by at least 2.8% to as much as 6.8%. These six stocks include the five largest ETFs and also Glass House Brands. Here is MSOS and its six current positions that account for 88.5% of the ETF in 2025 so far:
I remain very concerned about the high concentration of MSOS in just a few names. The ETF has declined by 3.5% this year, while the NCV Global Cannabis Stock Index is down 11.6%. The top 3, which are led by CURLF at 29.5%, include Trulieve, which I think is currently priced to high relative to peers, at 21.2%, and Green Thumb Industries, which I like relative to peers, at 20.9%. There is 71.6% in just three stocks!
If MSOS gets more redemptions, it will probably sell some of its large positions. So far, with the decline of shares outstanding in MSOS by 3.4% since mid-November, sales of its holdings have been made. MSOS has reduced its exposure to shares of Curaleaf by 3.4%, its exposure to TCNNF by 3.4%, and its exposure to GTBIF by 3.0%. We are coming into year-end, and this bad trade may end badly. Of course, MSOS may hold up for the next few weeks, but it has already dropped 34.1% since its 2025 high close of $5.57 on 8/29. Redemptions could trigger an awful sell-off of its holdings.
The recent redemptions are not the first ones, as there were more significant redemptions in late 2022 into early 2023. There were also some small redemptions in early 2025. Looking at the year-over-year growth over the past two years, it was soaring in the second half of 2024, most likely related to hopes of rescheduling and the upcoming election in Florida that was expected to legalize cannabis there from medical to also adult-use:
Currently at almost 40% growth over the last year, it is high growth that has already had a big impact on the price of MSOS. which at its peak in August was up 55% year-to-date. The world of cannabis investors has gotten much smaller, which leaves the entire sector, including MSOS and the MSOs as less liquid.
The game of potential rescheduling by the Trump Administration has excited traders, who like MSOS because it is a single security that trades on a higher exchange and has options. That game began ahead of the big news in mid-August, as someone started buying shares of MSOS in early July. Both the share-count rose and the price too, and trading volumes did pick up as well. Despite the surge in shares outstanding, MSOS is down year-to-date now, though it could fall a lot more if the rescheduling announced as being under consideration four months ago doesn’t take place. That last surge in excitement for MSOS in 2024 resulted in a move from the close on 11/05/24, when the elections took place, to a decline of 70.6% to its all-time intraday low of 2.02 set in early April.
How MSOS does will ultimately depend upon 280E taxation going away. Otherwise, stay tuned for more Ayr-like situations. I discussed the large amount of Curaleaf debt that is due in 2026 last week, and this is something to watch.
If 280E sticks around, it will be bad for all MSOs and this ETF. I continue to think that some Canadian LPs are safer than the MSOs, and they could rally further. I also see some ancillary companies that would benefit greatly if their customer’s faced a less onerous taxation. In Q4, MSOS is down 23.4%, while the Global Cannabis Stock Index has dropped 20.8%. If rescheduling doesn’t take place, this pressure on cannabis stocks, especially the MSOs, could get a lot worse.
Sincerely,
Alan
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is what we published this past week:
Exclusives
Cannabis Sales Drift Lower in November
Florida’s Medical Cannabis Market Continues to Struggle
Capital Raises
After Paying Down Old Debt, Trulieve Launches a New Debt Deal
M&A
Cronos Group to Buy Netherlands Cannabis Company
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