Cannabis Industry Exchange-Traded Fund to Shut Down this Month

One of the leading exchange-traded funds in the cannabis space will see its final day of trading this month, CNBC reports. The Poseidon Dynamic Cannabis ETF, managed by AdvisorShares, plans to stop trading on August 25 and will liquidate assets and pay shareholders by September 1.   

In a statement to CNBC, co-founder Morgan Paxhia said the fund was not “immune to the broader macro-economic environment and, more specifically, the dramatic shift in investor sentiment that has impacted the cannabis industry.”

Poseidon Investment Management started in 2013 as one of the first cannabis-focused hedge funds in the U.S. but it has seen its ETF lose roughly 74% in value since it was founded, versus a 1.7% decline in the S&P 500, the report says. On Tuesday, the day of the closure announcement, it was trading at under $1.00 and its value has fallen 65% in the last year. 

The fund’s downturn is due, in part, to the U.S. government’s inaction on cannabis law reforms – it remains a Schedule I drug, and cannabis businesses still do not have access to traditional financial services. Additionally, cannabis wholesale prices have declined, and publicly-traded cannabis businesses have struggled to scale profits. State-legal cannabis companies, meanwhile, must also persevere through high excise taxes, additional tax complications from Section 280E of the Internal Revenue Code, and competition from the generally unregulated sale of hemp-derived THC products, as well as from the illicit cannabis marketplace.

Pure US Cannabis ETF, another fund in the cannabis industry managed by AdvisorShares, has also lost about 60% of its value in the last year.