The social media platform X has certainly seen its fair share of word battles between cannabis executives and the latest has had many eating popcorn.
Green Thumb Industries Inc. (OTC: GTBIF) CEO Ben Kovler has been very vocal on the site about the AdvisorShares Pure Cannabis ETF (NASDAQ: MSOS) inner workings, giving voice to several questions other stakeholders have also been wondering about.
In December, Kovler wrote on X, “Nothing about this is personal. MSOS owns a lot of GTBIF & I have a duty to understand this in simple terms. I called Dan for the first time in more than a year (maybe 3) to ask, is it right that there have been no redemptions in MSOS since the election? That seems puzzling when the underlying are down 50%+. Dan confirmed no redemptions & didn’t have any firm answer about why except, ‘amazingly sticky investors.’ I wondered & still do, is there more to the story: Is there hidden leverage somewhere? Are the market makers shorting the underlying to hedge their long MSOS position pre redemption? How much of a factor is $MSOX which owns 6M shares of MSOS? (Of note MSOX has only seen inflows (!) since the election) How much of the 130M shares ($490M) long MSOS is ‘real’ vs AI?”
There is a vocal cohort on X that consistently criticizes the ETF, and they cheered Kovler on. Green Market Report reached out to Green Thumb for comment but got no response.
Yet GTI remains the largest position in the ETF at 34% of the holdings, with 21 million shares, despite complaints about the fund selling shares. The fund has a negative cash position and the selling was related to addressing that. As it was the largest position, it makes sense that it was the easiest position to trim.
AdvisorShares Investments CEO and Founder Noah Hamman said, “I think what Ben was talking about in some of his tweets… is we have a negative cash balance. And so what that commentates is a small amount of leverage. If I’ve got positive cash, it means I’m underinvested by a certain percentage, and if I have negative cash, I’m overinvested by a certain percentage.”
GTI is a heavily weighted position in the ETF, so it made sense for the fund manager Dan Ahrens to trim that large holding. Hamman added that rather than making a large transaction that would have an oversized impact on trading, they opted to do smaller trades over several days.
“He can sort of take his time and be gentle about it, not be disruptive relative to pricing is too much,” said Hamman. “And it helps us resolve our negative cash balance, which we’ve moved from a roughly negative $14 (million) now to about a negative $10 (million).”
The Twitterverse, though, saw the selling as a personal response to Kovler’s criticism. Hamman shot that down by saying that GTI is his favorite position.
“It’s a good company. It’s a good stock. I think people were trying to tie Ben’s comments and questions around it to those changes, but they’re not related. They (GTI) really did weather the storm better than most last year,” Hamman said.
Hamman also noted that the same critics didn’t like what they considered “garbage stocks” in the portfolio.
“We still like some of the companies that people would refer to as tier two, tier three, tier four. Having those smaller stocks did help. It didn’t hurt the portfolio performance last year,” he said.
The fund was down 45% in 2024 and squeezed out a positive performance in 2023 of 0.29%. It was down 72% in 2022 and 29% in 2021.
Hamman seemed to accept the criticism as the par for the course.
“I don’t mind everyone having their own opinion of how they would run the portfolio if it was theirs. They can pick other products, they can pick the stocks themselves, but at the end of the day, relative benchmarking relative peer group, Dan is seemingly doing a great job. And at this point, not shockingly, we’re used to a lot of what I’ll call armchair stock-picking quarterbacks,” he said.
AdvisorShares also continues to manage the Pure Cannabis ETF (NYSE: YOLO).
Naysayers will have fewer cannabis ETFs to complain about soon. Amplify ETFs announced earlier this month that it was closing the Amplify U.S. Alternative Harvest ETF (NYSE Arca: MJUS). The fund will be liquidated and a final distribution to shareholders is expected to occur on or around Jan. 30, 2025. The fund had 19 holdings and $62 million in assets under management. Its top holding was also GTI, which comprises 18% of the portfolio. Since its inception in 2021, the ETF is down a whopping 91%.
The remaining ETFs include the Cambria Cannabis ETF (CBOE: TOKE) which has $14 million in assets under management and 24 holdings. The Amplify Seymour Cannabis ETTF remains open with $11 million in assets and 26 holdings. The Roundhill Cannabis ETF (CBOE: WEED) is also still active, albeit with less than $5 million in assets under management.
[[{“value”:”AdvisorShares Noah Hamman says it’s just the opposite, GTI is his favorite position.
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