Investor Interest in the Cannabis Industry Declines

Employees at AdvisorShares, the company managing the world’s largest cannabis exchange-traded fund, Poseidon Dynamic Cannabis ETF (PSDN), have reported a significant drop in investor interest in the legal cannabis industry.

Investments in Cannabis Production Lead to Major Losses

In November 2021, trading of PSDN shares began on the New York Stock Exchange. The fund included shares of leading cannabis companies, such as Curaleaf—founded by Boris Jordan and the top revenue-generating cannabis company in the U.S.—and Planet 13, which owns the world’s largest cannabis store in Las Vegas. Despite this, the fund failed to attract traders, and its shares immediately began to lose value. Since its listing, the share price has plummeted by 90% and now fluctuates below $1.

PSDN Shares Lose Value

PSDN shares have essentially become worthless, prompting AdvisorShares to close the fund. Trading of its assets will cease on August 26, and investors will be refunded on September 1. Morgan Paxhia, the fund’s creator, stated that the fund fell victim to negative macroeconomic factors that changed investors’ attitudes toward the cannabis industry. He appears to be referring to the lack of progress in cannabis law reform in the U.S. Congress continues to resist legalization and has no plans to lift the federal ban on cannabis in the foreseeable future.

Cannabis Industry Stocks Drop Sharply

Another cannabis fund managed by AdvisorShares, the Pure US Cannabis ETF (MSOS), has also found itself in deep financial trouble. This investment tool focuses solely on the American cannabis industry, but that hasn’t saved it from devaluation. This year, the fund’s share price has dropped by 32% because the stocks of its constituent companies have fallen significantly.

According to research by Green Market Report, only three of the largest publicly traded cannabis companies in the U.S. turned a profit last year, with a combined profit of $36.5 million. However, the remaining 21 companies suffered a massive loss totaling $4 billion. The biggest financial hit was taken by Columbia Care, a cannabis retail chain, which posted a loss of $421.5 million.

Major Cannabis Producers Also Suffer Losses

The three leading cannabis producers could not avoid the fate of most industry players. Tilray’s stock price has dropped 91% from its all-time high in October 2018. Aurora Cannabis shares have fallen by nearly 97%, and Canopy Growth’s assets have plunged by 98%. It is clear that the decline in investor interest in the cannabis industry is directly linked to these significant losses.