Amplify ETFs will liquidate its U.S. Alternative Harvest ETF (MJUS), a further sign of problems in the struggling marijuana investment sector.
The $70 million fund will stop accepting new investment orders after Jan. 20, with shareholders having until Jan. 27 to sell their positions, according to a Jan. 9 company release.
An Amplify ETFs representative did not immediately respond to requests for comment.
Cannabis investment products continued to struggle in 2024 as sector-wide challenges persist, with several marijuana exchange-traded funds ranking among 2024’s worst performers. The closure signals deepening concerns for cannabis investors, as federal restrictions and market pressures raise questions about the viability of cannabis-focused investment products.
MJUS joined similar funds like the Roundhill Cannabis ETF (WEED) and AdvisorShares Pure US Cannabis ETF (MSOS) in facing steep declines, with each fund dropping approximately 48% in value in 2024.
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The fund’s board of trustees unanimously voted to close the fund based on a recommendation from Amplify Investments, the fund’s investment adviser, according to the filing.
Cannabis industry analyst Alan Brochstein wrote in New Cannabis Ventures that the fund currently has 81.15 million shares outstanding worth about $66 million, with the Amplify ETF MJ owning 94% of the shares.
According to the fund holdings data, the portfolio’s largest positions are through swap instruments, with Green Thumb Industries at 18.79% and Curaleaf Holdings at 13.1%, Brochstein wrote.
Source: etf.com
Despite potential positive developments like the Drug Enforcement Agency’s formal recommendation for rescheduling in April 2023, cannabis stocks have continued to face pressure from ongoing federal restrictions on banking access and interstate commerce, Brochstein explained.
Tax concerns also weigh on the sector, as the 280E provision of the U.S. tax code continues to impact cannabis company margins unless federal rescheduling moves forward, Brochstein wrote. The provision prohibits businesses from claiming deductions or credits associated with the “trafficking” of Schedule I or Schedule II substances.
The liquidation decision comes while Amplify ETFs manages $9.38 billion in 30 ETFs traded on U.S. markets, according to etf.com data.
