AKANDA Corp is set to become the latest cannabis-company to launch an Initial Public Offering (IPO), after it filed to launch on the NASDAQ stock exchange where it hopes to raise up to $27.6m
After submitting its draft registration with the Securities and Exchange Commission (SEC) in November last year, the international cannabis producer filed last week to list 4m new shares.
The new shares will be issued at a proposed price range of between $4 and $6, with a further 600,000 share over-allotment option offered for 45 days.
If this over-allotment is exercised in full, Akanda will have some 28.5m total outstanding shares, meaning that if shares sell at the top end of the proposed price it could have a potential market capitalisation of over $175m.
Led by Boustead Securities, the IPO will see Akanada’s stocks traded under the ticker AKAN, with estimates suggesting it could take place in the second quarter of this year.
Cash is Crucial to Future Operations
According to its filing with the SEC, Akanda needs this ‘significant additional capital’ to continue its current plan of operations ‘for the next 24 months’.
It added that if it was ‘unable to do so, we may have to curtail and possibly cease some operations’.
In its current plan of operations for the coming two years, Akanda plans to spend an estimated $200,000 on expanding its ‘hoop-house and shade cloth’ cultivation operations by around two hectares at its facility in the Kingdom of Lesotho, South Africa.
Akanda also plans to construct a one hectare forced air greenhouse and post-harvest drying facility for a total combined cost of $5m, and obtain EU GMP certification for this facility which is expected to cost a further $100,000.
By far the largest chunk of the expected cash influx however, will be spent on expanding its cannabis-based products for medicinal use (CBPM) distribution capabilities in the UK, estimating the project to cost some $13m.
In a previous release, Akanda said this will involve ‘building out our network of pharmacies, clinicians and other innovative channels’.
Alongside targeting the UK medical cannabis market, Akanda is also positioning itself to capitalise on the German opportunity, aiming to cultivate, harvest and export cannabis biomass to Germany through its wholly owned subsidiary Bophelo.
Akanda’s Structure
For the coming 18 months, Akanda says it expects revenues through production and sale of dried cannabis flowers’ to increase, but reiterated that the money raised from its IPO was fundamental to this growth.
“The timing of completion of any aspect of our plan of operations is highly dependent upon the availability of cash to implement that aspect of the plan and other factors beyond our control. There is no assurance that we will successfully obtain the required capital or revenues, or, if obtained, that the amounts will be sufficient to fund our ongoing operations.”
To fund its public listing and continue operating in the interim, Akanda recently announced the closure of a private placement for just over $5.3m, once again led by Boustead Securities.
Akanda was officially incorporated as a holding company in Canada in July last year as part of a share purchase agreement with multinational cannabis company Halo (NEO: HALO) (OTCQX: HCANF).
As part of this agreement Akanda acquired all the issued and outstanding equity interests in Cannahealth, seeing it acquire both BopHelo and Canmart as wholly-owned subsidiaries.
BopHelo, which owns the group’s South African cultivation facility, began trading in 2018 and recorded no revenue in the nine months to September 30 2021.
It currently has a licence to operate over a five hectare canopy area, and has conditional approval to expand this to 200, and aims to expand its operations beyond biomass and into oils and extracts next year.
Canmart meanwhile generated sales revenues of roughly $2,000 in 2020, the year it commenced operations, rising to $17,359 in the nine months to September 2021, selling CBPMs to patients in the UK.
