Tilray Fizzle Sends Cannabis ETFs Spiraling

A halo effect is generally described as when a sudden jump in one stock results in a sympathetic, often smaller, jump for others in the field. Halo effects can also work in reverse, too, and that’s what happened after Tilray (NASDAQ:TLRY) staged a double-digit plunge during Friday afternoon’s trading and sent cannabis stocks—and cannabis ETFs—in decline.

Tilray—like so many other firms these days—was looking to raise some cash. Its plan to do so featured a release of convertible senior notes valued at a whopping $150 million. Naturally, that unnerved shareholders to the point where many of them ran for the exits. But there was some collateral damage that many may not have considered: exchange-traded funds (ETFs) that hold Tilray also took a hit, and some significantly more so than others.

Indeed, the more Tilray some funds held, the worse off it was for them. For instance, Global X Cannabis (NASDAQ:POTX), which has 15.58% of its fund in Tilray, is down 28.9% this year and was down 4.82% at the time of writing. AdvisorShares Pure Cannabis (NYSEARCA:YOLO) has 4.84% allocated and was down 2.94%. Amplify Seymour Cannabis ETF (NYSEARCA:CNBS) has 10.26% allocated and was down 2.43% today. ETFMG Alternative Harvest ETF (NYSEARCA:MJ) has 8.08% allocated and was down 1.75% today. Finally, AYS Cannabis ETF (NYSEARCA:THCX) has 4.79% allocated and was down 1.61% in Friday’s trading.

So while the rate of descent didn’t coincide exactly with the amount of Tilray stock each fund held, the funds down hardest had substantial exposure to Tilray. AYS Cannabis was hit the lightest of the five and only has a Hold analyst consensus rating, but it also boasts 82.08% upside potential thanks to its average price target of $3.33. Meanwhile, Global X Cannabis is also a Hold but has 62.73% upside potential, thanks to its average price target of $12.21.

Disclosure