Could there be a new marijuana ETF on the way?

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June 11, 2019 11:37am NYSE:MJ

NYSE:MJ | News, Ratings, and Charts

From Todd Shriber: Global X, one of the largest purveyors of thematic exchange traded funds, is looking to add that lineup with a cannabis ETF.

In a recent filing with the Securities and Exchange Commission, the New York-based ETF issuer outlined plans for the Global X Marijuana ETF.

What To Know

Assuming the new ETF comes to market, it will track the Marijuana Index, which is provided by Solactive AG. Solactive provides indexes for several other Global X funds. The Marijuana Index is capitalization-weighted.

“In order to be eligible for inclusion in the Underlying Index, a company is considered by the Index Provider to be a Marijuana Company if it derives at least 50% of its revenue, operating income, or assets from the marijuana industry value chain,” according to the SEC filing.

The index defines the marijuana industry value chain as companies as “the legal production, growth and distribution of marijuana (including industrial hemp), as well as extracts, derivative products or synthetic versions thereof, providers of financial and real estate services to legal cannabis companies, healthcare companies engaged in pharmaceutical applications of cannabis, producers of cannabidiol (CBD) and products used to consumer cannabis and CBD.

Why It’s Important

The ETFMG Alternative Harvest ETF (NYSE: MJ) is the original U.S.-listed cannabis ETF and still the largest, but the market for cannabis ETFs indicates there is room for multiple competitors. The AdvisorShares Pure Cannabis ETF (NYSE: YOLO) debuted less than two months ago and already has $57.68 million in assets under management.

Privately held Brown Brothers Harriman will act as custodian and transfer agent for the Global X Marijuana ETF. Companies in the new ETF must trade on major U.S. exchanges.

There are some other qualifiers with the Marijuana Index worth noting.

“If a company grows, produces, distributes, or sells marijuana, products derived from marijuana or synthetic versions of marijuana, it cannot perform any such activity in any country, state, province, locality or other political subdivision where this activity is illegal under applicable law,” according to the filing.

Publicly traded medicinal cannabis and pharmaceutical companies with marijuana exposure operating in the U.S. “must be properly licensed and legal under applicable U.S. federal, state, and local laws to do so” to be included in the new ETF.

The ETFMG Alternative Harvest ETF (MJ) was trading at $32.73 per share on Tuesday morning, down $0.21 (-0.64%). Year-to-date, MJ has gained 0.63%, versus a 9.06% rise in the benchmark S&P 500 index during the same period.

MJ currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #56 of 85 ETFs in the Global Equities ETFs category.

This article is brought to you courtesy of Benzinga .

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