Marijuana stocks have been pretty much unstoppable since the beginning of 2016, and even more so since the beginning of 2019. In the first quarter, more than a dozen pot stocks logged gains of at least 73%, with the very first cannabis exchange-traded fund, the Horizons Marijuana Life Sciences ETF, gaining 54% during the first quarter.
The legalization of recreational marijuana in Canada has helped validate an industry that’s long been considered taboo. Legitimacy has been further established as there are now nine pot stockslisted on either the Nasdaq or the New York Stock Exchange (NYSE).
Two cannabis stocks…
Innovative Industrial Properties and Tilray, went the initial public offering route in December 2016 and July 2018, respectively. Meanwhile, seven other companies have uplisted from the over-the-counter (OTC) exchange to either the Nasdaq or NYSE. In doing so, these marijuana stocks have improved their volume-based liquidity, encouraged coverage from Wall Street investment banks, and listed themselves side by side with time-tested companies.
S&P 500 listing criteria eliminates all but two marijuana stocks
But one thing no marijuana stock has done is gain a listing in perhaps the most prestigious of all indexes: the broad-based S&P 500 (SNPINDEX:^GSPC). Sure, the Dow Jones Industrial Average may have a lot more history behind it than the S&P 500, but as a roughly 500 company, market-cap-weighted index, the S&P 500 is viewed by Wall Street and investors as the United States’ investment benchmark. Being added to the S&P 500 would be the ultimate victory for marijuana stocks.
Of course, gaining entry into the S&P 500 won’t be easy. There are eight criteria that an S&P 500 committee takes into account when selecting new companies to enter the index. These criteria sometimes have multiple subcategories that must be met for inclusion. In no particular order, the committee will examine a company’s market capitalization, domicile, liquidity, public float, financial viability, sector classification, stock exchange listing, and length of time publicly traded.
For example, in order to be listed in the S&P 500, a company would need to have a market cap of more than $8.2 billion, boast an annual dollar-value traded to float-adjusted market capitalization of greater than 1, and have a minimum monthly trading volume of at least 250,000 shares over the six-month period leading up to the committee’s evaluation date. The committee also excludes companies that are listed on the OTC exchange, master-limited partnerships, exchange-traded funds, preferred stock, royalty trusts, and ADRs.
Suffice it to say, almost the entire…
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