Matt Markiewicz is today's featured Cannabis Investor. The HempTown USA Cannabis Investor Series is back for the third year. This year, the Series is featuring eighteen of the cannabis industry's top investors who review the previous 12-months and share their 2021 investment strategies. On today's episode Dan Humiston is joined by Matt Markiewicz from THCX The Cannabis ETF. Produced by PodCONX
Matt Markiewicz is today's featured Cannabis Investor.
The HempTown USA Cannabis Investor Series is back for the third year. This year, the Series is featuring eighteen of the cannabis industry's top investors who review the previous 12-months and share their 2021 investment strategies. On today's episode Dan Humiston is joined by Matt Markiewicz from THCX The Cannabis ETF.
CI3 Cannabis ETF
[00:00:00]Matt Markiewicz: And because of that from a retail investor perspective, that's where the opportunity lies is the potential money flow that when these asset managers are able to invest in cannabis stocks.
There's an opportunity to provide a lift for the group when they. Come into the sector because they're not there now. So that's something that I want everyone to realize is that it's a very retail dominated,a stock market is very retail dominated, especially here in the U S and because of that, I'm very optimistic of the future for the group. They're raising cannabis capital. We are continuing this year's cannabis investor [00:01:00] series with Matt Markovich, the managing director of the cannabis ETF T H CX Matt. Welcome to the show.
Hey, Dan. Thanks for having me.
Dan Humiston: I'm glad you're here. Cause the cannabis ETF, T H CX lotta letters is unique for a number of reasons. And I wanted to discuss and talk about all of those reasons.
I also want to take a deeper dive into the cannabis public markets, but before we do that, you're the only ETF and this year's cannabis investor series. So can you quickly explain how a cannabis ETF works?
Matt Markiewicz: Sure. again, thanks for. You're having me on here and, to all the listeners for tuning in here. so an ETF stands forexchange traded fund. And is it's a portfolio of publicly traded companies. that, attempts to, give investors exposure to legal, global cannabis industry.
Now, why do I say illegal? When we launched this fund in July, 2019, the [00:02:00] sec was very clear about, none of the cannabis ETF that trades in United States, owning stocks that are plant touching. So in other words, no multi-state operators.
Green thumb, Cresco labs, clearly, truly, et cetera. some of the larger MSOE that folks might be,familiar with. So at this time we are not able to own that.
but part of the other stipulation is that we're only allowed to own stocks on five exchanges around the world. that being Australia, the New York stock exchange, the NASDAQ, the Toronto stock exchange and the Toronto venture exchange. So if a stock is not listed on any of those exchanges, we are not able to own it.
By default means that the MSO that I mentioned, they're not able to list on those exchanges.
Dan Humiston: Okay, just to follow up on that one, you can invest in plant touching publicly traded companies that are on the Toronto stock exchange
[00:03:00] Matt Markiewicz: Correct. So if it's Toronto or the TSX or the TSX venture exchange up in Canada, then we are allowed to invest in those companies. If a company trades on the, the CSE. Which a lot of the MSO is trade on the CSE, the Canadian, Canadian securities exchange, we are not able to own those stocks because they often trade OTC in the States.
So those are the over the counter market and ETFs are not allowed to own over the counter stocks.
Dan Humiston: I think a lot of people had a bad taste in their mouth about the public stocks. But if you think now's the right time to get back in.
Matt Markiewicz: Is it a better time to start establishing, position? I'm not saying going all in, but, any. Investment, you should make that investment all at once, right? it should be more of a gradual allocation. valuations are more reasonable relative to growth expectations, both in Canada and the U S right now, but the risk assets of which cannabis stocks are probably the most risky, they tend to get thrown out with the bath water when other risky [00:04:00] assets get sold off.
Dan Humiston: Yeah. and, you didn't even really mention, the COVID effect. , it's there, it's always therehow has it impacted some of your companies
Matt Markiewicz: what I find just a little perplexing is that you're talking about an industry that for years was living in the shadows, an extent still is in the U S it's been made an illegal industry
Dan Humiston: Yeah.
Matt Markiewicz: and all of a sudden these businesses get deemed as essential. In other words, they were. Allowed to stay open during this pandemic.
it's really shocking that again, when everyone's worried about, yeah, airlines, obviously a hotel malls, those companies have suffered greatly yet. There's cannabis industry plotting along, just churning out record sales. And, again, I still feel like investors just haven't, taken notice.
Dan Humiston: it's almost. inconceivable a year ago, where you would say, you know what, we're going to say, cannabis is more important than Disney. what are you talking about? you're going to shut down Disneyworld, [00:05:00] but we're going to keep all the cannabis open,that's it would be, like I said, almost inconceivable let's talk about investors for a second.
the nice thing about working with you is the liquidity aspect of it is that you buy your stock in the morning and sell it in the afternoon. So there's not that longterm. Commitment. the other thing that I think I know is that you also provide dividends.
Matt Markiewicz: Correct. Yeah. We, actually pay a dividend, which I know might. be a little head-scratching to investors, the fact that a cannabis ETF, distributes income where, 95% of our companies aren't even profitable. so how are we able to do that? that's the real question.
, there's a strong desire, from institutional investors and retail investors as well to short kind of a stocks. In other words, they're betting that the cannabis stocks will go down in order to [00:06:00] short stocks. So you need to actually go out and borrow them. So there has to be someone who's a long holder from home.
You go and borrow the stocks. We are a long, only vehicles. So short sellers will come to us to borrow stocks so they can short them. And the fund charges a rate to those ambassadors to borrow stocks on an individual basis. LA take that those revenues that are generated from lending and we return the overwhelming majority of them to shareholders in the form of a dividend.
I will say that the desire to borrow cannabis stocks has waned over the past two months, which, actually leaves me feeling fairly optimistic about the industry's future. getting back to, so your original question is now , a good time to get in the fact that we're seeing less demand to borrow or short cannabis stocks.
It's very encouraging for as long as we've been running the fund, 14 months now we've not seen this type of drop off in demand from here. But again, that is something that I think a lot of investors maybe aren't aware of [00:07:00] or overlook is the fact that the demand to short cannabis stocks is definitely lower now than it was a year ago.
Dan Humiston: Yeah, see, that's a really good sign I would think. And, especially for our listeners right now, that's a real good tip for everybody that paper, they wouldn't have otherwise known. , we're going towrapping this up now, but I will have mats the link to mats, website and anything you want to know about, the cannabis ETF, T H C X I will be, in the show notes.
So if you want to follow up with Matt afterwards and talk offline with him, I'm sure he'd be happy to discuss this further with you, because there's just so much more that we could talk about with
Matt Markiewicz: yeah, we can go down the rabbit hole. I do want to end the Dan with sort of a couple interesting numbers. Currently only around 9% of publicly traded cannabis market cap is owned by us institutional investors that compares to. Around 68% of the Russell of the S and P 500 [00:08:00] stocks are owned by us institutional investors.
So there is a very low penetration of any big asset manager. you can kind of name at American century, BlackRock Vanguard. These firms do not have. Many cannabis stocks as part of their portfolios. And because of that from a retail investor perspective, that's where the opportunity lies is the potential money flow that when these asset managers are able to invest in cannabis stocks.
There's an opportunity to provide a lift for the group when they. Come into the sector because they're not there now. So that's something that I want everyone to realize is that it's a very retail dominated,a stock market is very retail dominated, especially here in the U S and because of that, I'm very optimistic of the future for the group.
Dan Humiston: Oh, I'm glad you left us with that, because , I think that's really important because of the volatility of the cannabis, Publix stocks, I think people are just a little wary of it, but to your point, the reason that there is so much [00:09:00] volatility is because 91% is retail. So there's no backstop.
Matt Markiewicz: You got it. think about it, like in the context of an Amazon or an Apple, if Amazon or Apple is down 10% over the course of a few days there's always some marginal institutional buyer.
that's ready to sit there and say, you know what? Down 10% of this is this move is not justified. I'm going to add to my position. There is no institutional backstop by and large, from a us investor perspective for cannabis doctors. It's not there. that will change at some point.
I'm not saying that 9% goes up to 68 or it goes up to 80% like other large cap stocks or, the, an overall us market. But even if that's a double over the course of two years,that's a significant amount of money that, will come into this space.
Dan Humiston: like I said, we'll let people talk to you offline. You can continue this conversation, Matt. Great catching up. Thanks for all this information. I'm sure people are going to be interested to learn more about cannabis, ETFs thanks for being on the show.
Matt Markiewicz: Thanks for having me, Dan. Appreciate it.