The ETFMG Alternative Harvest ETF (NYSEArca: MJ) fell 5 percent on Wednesday after Canada-based Aphria Inc. rejected an acquisition offer from U.S.-based cannabis producer Green Growth Brands.
Cannabis stocks fell in unison following the news, hurting MJ’s holdings like Canopy Growth Corp. and Cronos Group Inc. Canopy Growth fell as much as 5 percent while Cronos Group declined 8 percent.
Aphria rejected the offer after not seeing eye-to-eye with Green Growth Brands on the valuation of the company. According to Aphria, the offer by Green Growth Brands to acquire a controlling interest presented a substantial discount relative to the company’s current and future value.
Furthermore, Aphria said the proposed offer would include a share in a company with “limited operations” as well as experience in the cannabis industry. Green Growth Brands first announced its bid to take over Aphria on December 27, 2018.
“Regardless of their brazen attempts to suggest otherwise, GGB is asking Aphria shareholders to accept a substantial discount on their shares, as well as delisting from both the TSX and NYSE, resulting in a vast dilution of their ownership in Aphria,” said Aphria Chairman Irwin Simon.
Cannabis ETFs Reach $1B in AUM
The news comes as MJ and the Canada-based Horizons Marijuana Life Sciences Index ETF (HMMJ) both crossed the $1 billion mark in assets this week. This is not the first time HMMJ crossed that milestone, last achieving the feat back in October when Canada legalized marijuana.
As for MJ, like most U.S. equities, it got racked by the volatility in November and especially December as the ETF fell below its 200-day moving average. However, MJ is up about 40 percent to start 2019 and HMMJ is up close to 50 percent.
HMMJ was the first ETF to track the cannabis industry when it first arrived in the marketplace on April 2017.
MJ and its cannabis stock holdings experienced exponential growth in 2018 and could see more of the same in 2019. Neal Gilmer, a research analyst with Haywood Securities, is projecting that the US cannabis market could be worth between US$15.9 and US$21.7 billion by the year 2022.
For more market trends, visit ETF Trends.