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).

Less competition

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.

The one-for-ten reverse split for the AdvisorShares Psychedelics ETF starts with today’s trading. The split will not change the total value of a shareholder’s investment.

That means every ten shares of the fund will be exchanged for one share. Furthermore, the total number of issued and outstanding shares will decrease. In addition, the per share net asset value (NAV) and the next day’s opening market price will be approximately ten times higher for the fund shares.

Noah Hamman, CEO of AdvisorShares said, “We are reverse splitting due to the low price of the net asset value. When an ETF price gets too low, it can be more difficult and expensive to trade. For PSIL, the fund has such a small amount of assets, we have to subsidize the cost of the fund (literally pay some of the expenses of the fund out of our own pocket).”

The year-to-date return of PSIL is -42% and the one-year performance is -54%. Despite the promise of psychedelic drugs for a variety of mental health issues, the financial payoff of these investments is likely years away. In addition to the long-term horizon of these investments, the recent decision by the FDA to reject the Lykos Therapeutics application for MDMA tampered expectations.

Yet, even before the FDA decision, many psychedelic drug companies were finding that their runway was longer than their bank accounts would allow. Despite raising millions, many companies told investors that they might run out of money before they could deliver any revenue-producing products. That has caused many stock valuations in the sector to tumble.

Earlier this year. Horizons ETF Management announced it was closing its Psychedelic Stock Index ETF. The company liquidated the ETF and gave investors back some money, which in hindsight, looks like pretty decent timing. Before that, Elemental Advisors launched its psychedelic ETF in 2022 and then promptly closed in March 2023.

Hamman added, “If the NAV were to continue to decline, we would consider another reverse split. The low NAV isn’t really a consideration for closing the ETF, however, assets in the fund are a consideration. While PSIL does have a small enough AUM level to close, it remains the only ETF in the market with its focus on psychedelics and mental health, and we’re working as hard as we can, and to continue to invest the costs of keeping it open with the expectation that more investors over time will look to invest in this emerging and beneficial industry.”

It could be rescheduling hopes or just more optimism in general, but it seems investors are warming up to cannabis again. In just the past couple of weeks, more companies have announced huge private placements and increased offerings. Is this an early sign of green shoots from credit markets?

One example: On July 18, Jones Soda Co. (CSE: JSDA, QTCQB: JSDA) upsized its private placement twice to satisfy the thirst for the stock. What began as a $3 million offering, got bumped up to $4 million and then again to $5 million.

“Based on strong demand, we are pleased to increase the size of the private placement to allow more interested parties the opportunity to participate,” CEO David Knight said just a week ago.

Jones said that its focus in 2024 was sales growth with plans to expand the Jones Soda glass bottle business in existing and new sales channels, expand the fountain program in the United States and Canada, and grow the Mary Jones brand, which includes tetrahydrocannabinol (THC) and cannabidiol (CBD)-infused beverages, edibles, and other related products.

Other recent deals

Also this week, Willow Biosciences Inc.(TSX: WLLW) (OTCQB: CANSF) closed its previously announced brokered private placement offering of 16,397,365 units at a price of $0.10 per unit for aggregate gross proceeds of $1,639,736.50. Dr. Chris Savile, president and chief executive officer of Willow said, “The proceeds provide the company with the funds needed to continue execution of our programs and partnerships through to commercial realization that are anticipated in 2024 and into 2025”.

Not wanting to be left out of the party, Avant Brands Inc. (TSX: AVNT)(OTCQX: AVTBF) announced the terms of a proposed non-brokered private placement of unsecured convertible debenture units at a price of $1,000 per convertible debenture unit for gross proceeds of up to C$3.9 million. That follows a C$2.39 million private placement closed on June 3, according to regulatory filings. The company also restructured some debt during the quarter, including extending a convertible debenture’s maturity.

Ascend Wellness Holdings Inc. (CSE: AAWH-U.CN) (OTCQX: AAWH) closed its previously announced private placement of $235 million of 12.75% senior secured notes due in 2029. The company used the net proceeds of the notes, together with cash on hand, to prepay $215 million of principal amounts outstanding under its existing term loan.

“Ascend’s successful refinancing signals an opening of the credit markets, and we expect other solid MSOs to follow suit,” Viridian Capital Advisors’ analysts wrote. “In particular, GTI has a $275 million term loan maturing on 4/25, and we expect the company to take action to refinance that relatively soon.”

Not a minute too soon

Viridian also found that capital fundraising activity in the marijuana and psychedelics industries had dropped by almost 40% in the last year. By sheer dollar amount, fundraising is down nearly 50%.

As the comment period for rescheduling cannabis from a Schedule 1 drug under the Controlled Substances Act to a Schedule 3 drug draws to a close, interest in the space looks to be growing again. The price of the AdvisorShares Pure U.S. Cannabis ETF has risen from a recent low of $6.98 to sell lately at $7.70.

On Monday, Water Tower Research analyst Jesse Redmond wrote, “It was a good week for cannabis stocks, with the US cannabis MSOS ETF gaining 6.15% and global YOLO increasing 5.15%. The Cannabist (OTCQX: CBSTF) +16.67% was the biggest winner among the larger MSOs, while MariMed (OTCQX: MRMD) -10.53% lost the most.”