Viridian Shares A Look At Its Cannabis Stock Index And Potential Marijuana ETF
Viridian Capital Advisors is one of the world’s top financial and strategic advisory firms in the cannabis industry. Benzinga recently had a conversation with the company’s founder and president Scott Greiper and one of its analysts, Harrison Phillips, who shared some insight into the market.
The Cannabis Stock Index
While Viridian does not recommend individual companies, its Cannabis Stock Index tracks a few biotech companies including GW Pharmaceuticals PLC- ADR (NASDAQ: GWPH) and Zynerba Pharmaceuticals Inc (NASDAQ: ZYNE).
“Those are by far, not only the highest valued by market cap [and price-value], but the ones that have the most evidence of clinical trial progress as they move along the FDA process,” Greiper voiced.
“We maintain that index not to recommend individual stocks, but to give us a sort of market intelligence as to which of the companies are attracting the most capital and which sectors are attracting the most capital” and doing best in terms of stock performance, he continued.
A Cannabis ETF Coming?
When asked about the possibility of turning the Viridian Cannabis Stock Index into an ETF, Greiper said the firm would “like to do something in the first half of next year.”
“The mitigating factor to anybody creating an ETF, let alone the Viridian Cannabis Stock Index, is the underlying liquidity of the component companies in the index, because indexes are constantly rebalanced, which implies selling or buying new shares of new component companies,” he explained.
“If the underlying companies don’t have sufficient liquidity, and you are either selling out of a position or adding a position, you are going to affect the value of the stock. So, the challenge in creating a cannabis index is that, up until the last three months, particularly the three months leading into the November elections and the state voting on cannabis legalization [. ] we didn’t have the underlying liquidity that was sufficient to support a cannabis ETF.”
However, this is beginning to change now, he supplemented, expounding that this is why Viridian is now pursuing an ETF.
After The Election
Since the election, the Cannabis Stock Index has shown a decline in volume. So, Benzinga asked about the move.
“You really have to look prior to the elections; the volume was pretty steady throughout the year, but increased dramatically within the two months going into the elections, and a few weeks afterwards,” Phillips answered.
“We saw that increase in volume as investors making bets on the public cannabis stocks in anticipation for the results that were going to likely come out of those November elections. Following the elections, we saw a little bit more buying in, as our index went up a little bit [. ] but then we saw some profit taking, and a decline in volume,” he explicated.
However, investors that got in a bit later did not seem to be taking profits, but rather looked like they were “holding on to the securities they got into a little bit later, in anticipation of growth going into 2017,” Phillips added.
“It was the proverbial textbook ‘buy on rumors, sells on news,’” Greiper supplemented. “The anticipation, not just from public stock buyers, but from private companies and investors in the industry, to position themselves ahead of the November 8 voting, and most particularly California and Massachusetts, drove the increasing pace of capital raises, the increase in pace of M&A transactions, and the material increase in our index.”
“The M&A transaction and capital raises haven’t stopped. Other than the week of Thanksgiving, we’ve continued to set records in terms of number of announced deals and the size of announced deals, even through last week,” the company’s president concluded. “What has slowed down is the underlying trading in the public stocks. It got quite rabid, so we’re starting to see a little bit of a normalization back to pre-election levels of liquidity. We are at higher levels than — let’s say — in the summer, but not quite at the fluffy trading levels that we saw leading up to the elections.”
Liked this interview? Check out our conversation with Blues Traveler’s Brendan Hill, who explained why he believes big players will wait to enter the marijuana industry.
Viridian Capital Advisors is one of the world’s top financial and strategic advisory firms in the cannabis industry. Benzinga recently had a …
Cannabis Stock Index Grew 236% In 2016
Marijuana’s ambiguous legal status appears to have little effect on cannabis investment euphoria.
Putting money into the marijuana industry has become one of the hot topics for stock market investors.
The internet abounds with articles and a rapidly increasing number of advertisements ready to advise people on what marijuana stocks to invest in and how to maximize a cannabis-heavy stock portfolio.
Some compare it to the tech boom of the late 1990s. Whether that is true remains to be seen.
However, one company offers a fairly straightforward assessment of how cannabis-related stocks have performed. And for 2016, they indicated a growth of 236 percent. By way of comparison, the S&P 500 gained just under 10 percent in 2016.
And potential investors can also track the performance of the one marijuana business now listed on the New York Stock Exchange.
Innovative Industrial Properties
The only publicly traded marijuana industry stock on the NYSE is Innovative Industrial Properties, a Real Estate Investment Trust that deals with commercial properties rented out to marijuana companies for the cultivation, growth and storage of cannabis. The company’s IPO happened last November. The company trades under the symbol IIPR.
After opening at 19.75 per share, the stock dropped to 15.29 by Dec. 5. However, since then the stock has risen steadily, closing at 18.14 on Feb. 3.
The Cannabis Index
While IIPR is on a major stock exchange, many cannabis-related stocks trade on the Over-the-Counter Market. However, some stocks on major exchanges are considered ancillary businesses to the marijuana industry, including agriculture technology, real estate, security and consulting services.
Viridian Capital Advisors specializes in financial and consulting services for marijuana businesses. They also have developed the Cannabis Stock Index, which follows about 50 publicly traded legal marijuana companies. All must meet the following criteria:
- A $10 million market capitalization
- An average daily trading volume of at least $20,000
- A float (outstanding shares) of at least 25 percent
- Financial reports filed on time for at least the last six months
Among the stocks tracked include GW Pharmaceuticals and Zynerba Pharmaceuticals.
Viridian plans to launch a cannabis Exchange Traded Fund at some point in the future. One issue blocking that is insufficient liquidity with some of the stocks including in the index, requiring frequent rebalancing within the index. That’s something that the company hopes will change as the industry grows, said Viridian CEO Scott Greip, according to MarketWatch.
Still, the Cannabis Index offers some insight into how marijuana investors are doing.
Tracking these stocks, Viridian now issues a weekly report on the status of the index.
They found that after a flat first half of 2016, the Cannabis Index rose sharply in the second half of 2016 as legalization votes in a number of states got closer and then were approved by voters. Those gains included almost 31 percent in the third quarter and 155 percent in the fourth quarter.
For the year, the gains rose to 256 percent. So far in 2017, the index started flat, but rose about seven percent the last week of January.
Putting money into the marijuana industry has become one of the hot topics for stock market investors. Some compare it to the tech boom of the late 1990s.