Cannabis ETF MSOS Skyrockets Following HHS Rescheduling Recommendation; Valuations Surge

NEW YORK— The cannabis industry has witnessed unprecedented growth in recent years, and the latest surge comes on the heels of a groundbreaking announcement by the U.S. Department of Health and Human Services (HHS). The AdvisorShares Pure US Cannabis ETF (MSOS) experienced a meteoric rise, gaining an astounding 69.4% between August 25, 2023, and September 8, 2023, setting a new record for cannabis-related investments. Simultaneously, valuations of major multi-state operators (MSOs) have soared, reflecting the industry’s increasing legitimacy in the eyes of investors.

HHS Rescheduling Recommendation Ignites MSOS ETF

The catalyst behind this remarkable upswing was the HHS’s announcement on September 2, 2023, recommending the rescheduling of cannabis from its current Schedule I classification to a lower schedule. This long-awaited decision was celebrated by the cannabis industry, sparking a buying frenzy among investors who saw the potential for a major shift in the legal landscape for cannabis.

The MSOS ETF, a prominent cannabis-focused exchange-traded fund, began its ascent just days before the HHS announcement, and its impressive 69.4% gain within the following two weeks confirmed investors’ bullish sentiment. This surge marks one of the most significant short-term gains in the cannabis market’s history, underscoring the growing acceptance of cannabis as a legitimate investment opportunity.

Valuation Multiples Soar for Major MSOs

Viridian’s Chart of the Week delved into the valuation multiples of the eleven largest MSOs, offering insight into how previous announcements have influenced cannabis equity prices. Following the HHS rescheduling recommendation, the market response has been nothing short of astounding. The forward EV/Next-Twelve-Month consensus EBITDA multiples for this group have surged by a remarkable 27.5%, reflecting the substantial confidence investors now have in the sector.

The valuation multiples of major MSOs were already on an upward trajectory before the HHS announcement, but this latest development has accelerated their ascent. Cannabis companies are now being viewed through a more favorable lens by Wall Street, signaling that institutional investors are increasingly willing to take positions in the industry. This shift in sentiment reflects growing confidence in the cannabis sector’s long-term potential.

Key Takeaways for Investors

The cannabis industry’s rollercoaster ride continues to captivate investors as it evolves from a niche market to a mainstream investment opportunity. The record-breaking performance of the MSOS ETF following the HHS rescheduling recommendation highlights the importance of regulatory developments in this industry. However, investors should exercise caution and conduct thorough due diligence when considering cannabis-related investments, as regulatory uncertainties and market volatility remain.

As cannabis moves closer to potential federal legalization, market participants must keep a close watch on the evolving regulatory landscape. Furthermore, with valuations of major MSOs soaring, investors should carefully evaluate individual companies and their growth prospects to identify the most promising opportunities in this rapidly expanding industry.

In conclusion, the cannabis sector’s recent surge, driven by the HHS’s rescheduling recommendation and reflected in the astounding performance of the MSOS ETF, demonstrates the growing acceptance and enthusiasm for cannabis investments. As the industry continues to evolve, investors must navigate the market with diligence and prudence to capitalize on the potential rewards while managing the inherent risks.