Marijuana ETF Gains on Tilray Partnership for Global Distribution
This article was originally published on ETFTrends.com.
The ETFMG Alternative Harvest ETF (MJ) gained as much as 2 percent on Tuesday after one of its holdings, Tilray Inc, recently announced a partnership with pharmaceutical giant Novartis AG to facilitate global supply and distribution for medical marijuana.
Tilray surged close to 20 percent in Tuesday's trading session following the announcement, while Novartis was down slightly at 0.4 percent. Following investments from big-name tobacco and beverage companies into Canadian marijuana companies, this latest partnership helps to add a veil of legitimacy to the nascent, but growing marijuana industry.
“Around the world, people are substituting medical cannabis for traditional pharmaceutical products,” said Tilray Chief Executive Brendan Kennedy. “Medical cannabis is disrupting Big Pharma, and Sandoz and Novartis are smart for being ahead.”
According to Kennedy, the partnership is the first of its kind that features a collaborative agreement with a major pharmaceutical company and a cannabis company. The partnership with Novartis AG will build upon its current agreement with its subsidiary company Sanoz to expand its market share exposure to 35 countries with medical marijuana legislation in place.
“The key point is that it will allow us to expand into more markets, more quickly,” Kennedy said. “This is an agreement that will take advantage of Sandoz’s global footprint and leverage their brand, which inspires trust and confidence with pharmacists around the world. Also, we can use their salesforce to educate physicians and pharmacists around the world — which can be a challenge.”
MJ reached a high of over $40 per share in September before the latest U.S. equities sell-offs tamped down its gains to its current price of $26.57 as of 2:15 p.m. ET.
Related: Marijuana ETF Boosted by Altria, Cronos Cannabis Rumor
Second Marijuana ETF in the Works
MJ may not be the only ETF on the market that caters to the marijuana industry in the U.S. capital markets for much longer as Innovation Shares LLC recently filed with the Securities and Exchange Commission to launch the Innovation Shares Cannabis ETF. The filing couldn’t be more auspicious as recent regulatory changes have been paving the way for more marijuana usage whether it's medical or recreational.
The 2018 Midterm Elections saw the Democrats obtain control of the House of Representatives, while the Republicans maintained their majority in the Senate–a bifurcated Congress in terms of political parties could spur more cannabis-related legislation. Analysts predict that a more Democratic House would offer the least path of resistance for major federal legislation, such as the SAFE Act and STATES Act.
The SAFE Act would disallow the federal government from punishing banks from offering services to marijuana-related businesses where it is legal, while the STATES Act would effectively eliminate federal involvement altogether in any of the states’ marijuana laws. Since the latter is more all-encompassing, it would likely come under the most scrutiny by lawmakers.
Following the midterm elections, three of four states successfully passed cannabis-related legislation. Michigan became the 10th state to legalize recreational marijuana, joining Washington, Oregon, California, Nevada, Colorado, Maine, Vermont, Massachusetts, Alaska.
According to the Innovation Shares filing, the ETF will be based on a proprietary index that tracks “the performance of a portfolio of exchange listed common stock of companies in primarily the United States and Canada that have a business interest in to the legal cannabis, hemp or CBD-based (i.e., products that contain cannabidiol) pharmaceutical and consumer wellness & product markets. A company has a business interest in the legal cannabis, hemp or CBD-based pharmaceutical and consumer wellness & product markets if a significant percentage of its revenues are
Furthermore, companies for inclusion in the index are “screened to not include stocks that have a market capitalization below $100 million. Constituents must also have traded at least 200,000 shares during the month of reconstitution. At the time of monthly reconstitution, the Index constituents are weighted according to their market capitalization with the individual weight of an Index constituent capped at seven percent (7.00%), with the excess weighting proportionately distributed between the remaining constituents.”
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