A Toronto-based asset management firm appears to be bowing out of the cannabis business after shuttering the two ETFs it launched less than two years ago to give investors exposure to the sector.
Evolve ETFs announced on Monday that it would be delisting its Evolve Marijuana Fund ETF (ticker, SEED) and its Evolve U.S. Marijuana ETF (ticket, USMJ) by March 30, 2020 from the TSX and NEO exchanges respectively. New investments will not be accepted as of Feb. 26. As for investors who already have positions in the funds, they’ll be forced to redeem them by the end of March.
The independent investment firm launched in 2017 and soon after began to focus its product line on innovative and new industries, including cybersecurity, e-gaming and the future of automobiles. While other firms found success with index-based cannabis ETFs, Evolve gave investors an alternative by launching the actively-managed SEED ETF in February 2018. The ETF would give investors exposure to Canadian and global cannabis companies.
At the time, CEO Raj Lala referenced the incredible growth potential that investors saw for the industry.
“We believe the international cannabis industry is poised to exceed $30 billion by 2021, which would be a 60 per cent compounded annual growth rate in the next few years,” Lala said in a press release in 2018.
Evolve doubled down on the cannabis boom in April 2019 with its USMJ ETF, another actively-managed product that would focus entirely on the U.S. industry. At the time, SEED was gaining steam, up more than 30 per cent. It had just reached an all-time high of $30.66 after launching at $20.48.
But the firm’s timing could not have been worse as the cannabis industry would soon enter a devastating bear market that has seen some of Canada’s top companies in the sector lose more than 50 per cent of their value. The industry has yet to recover and there are doubts as to whether the companies within it may ever return to the trading levels they hit in March 2019.
After opening its first day on the market at $20.25, USMJ would hit its all-time high only eight days later at $21.75. The ETF is now trading at $10.24. SEED has followed a similar path and was trading at $11.57 on Monday morning, more than 62 per cent off its all-time high.
Evolve also announced Monday that it will be terminating its Evolve North American Gender Diversity Index Fund.