CANTOURAGE has become the third and largest major European medical cannabis operator to go public this year, as investment confidence in the cannabis sector shows further signs of recovery.
The young German company officially announced plans to go public on Frankfurt Stock Exchange (FSE) on November 10, before launching its shares on the ‘scale’ segment of the market a day later on Friday November 11.
It now joins German stablemate Synbiotic and Danish operator Stenocare on the FSE, and marks the second major investment in German cannabis in as many months despite the ongoing financial crisis across the continent.
Cantourage’s CEO Philip Schetter, who is expecting the company to triple its revenues this year, said that the listing ‘marks the start of the next phase in Cantourage’s growth story’, as it takes aim at the upcoming recreational market and expansion into Europe.
The Listing
Cantourage is understood to have made a total offering of 12,467,479 shares, the vast majority of which were offered privately prior to last week’s public offering.
This private placement, thought to have taken place in late summer, saw high-net worth individuals and family offices participate, with ‘company circles’ at the time suggesting the company was valued at close to €100m.
On Friday, the company made ‘approximately 15%’ of its total bearer shares available in free float on the open market of the FSE under the ticker symbol HIGH, equating to around 1.9m shares.
These were listed for €6.48 on the scale segment of the market, similar to the London Stock Exchange’s AIM market where small and medium sized companies can access capital.
The listing price of €6.48 valued the company at just over €80m, on a reported turnover in 2021 of €5.2m.
Since Friday, Cantourage’s shares have skyrocketed by nearly 300%, trading at just over €23 at the time of writing, valuing the company at $287m, though this initial post-listing spike is expected to settle in the coming weeks.
It is also worth noting that these price swings happened with very low stock market turnover, with just 27,000 shares traded via the FSE’s Xetra trading system on Friday, and around 17,000 on Monday morning, meaning the share price will be sensitive to large purchases or sales.
According to the company, it aims to use the funds to ‘expand its production capacities, enter new markets, and prepare for the upcoming legalisation of recreational cannabis in various European countries’, citing the possibility of both organic and non-organic growth.
The young company, founded in 2019 and now run by Aurora’s former Managing Director of Europe Mr Schetter, saw its revenues increase more than tenfold between 2020 and 2021, while its net losses doubled to nearly €1m.
Mr Shetter added: “Having already achieved revenues of over EUR 5 million in 2021, we are aiming to triple this amount in 2022, especially through Cantourage’s organic growth – and we are continuing to act in a strong growth market.”
German Investment
Cantourage’s public listing comes just over a month after Sanity Group, another leading cannabis operator based in Berlin, closed Europe’s largest ever cannabis investment round worth €37.6m, bringing its total funding to date to over €100m.
According to industry sources, news that big hitters like tobacco giant British American Tobacco (BAT) led the round drove an immediate influx of new financial interest into German cannabis operators.
During the week the news was announced, Synbiotic’s stock rose 10%, and has since increased by around 35%.
Similarly, the only other publicly traded German cannabis company Cannovum, has seen its stock increase by around 11%, while FSE-listed Stenocare has also seen a 12% increase.
This increasing investment interest in the German cannabis market has also been driven by the release of the Government’s ‘key points paper’ in late October, which laid the foundation for how the country’s upcoming adult-use market could look, while helping reaffirm the Government’s commitment to delivering legalisation.
Although the growing investment interest is currently focused on Germany, signs are emerging that the positive sentiment towards cannabis investment is spreading throughout European markets.
The same week the news broke that Cantourage was gearing up to go public, Greek cultivator Hellenic Dynamics was also reported to be making meaningful progress towards its public listing.
Hellenic first approached the regulator regarding a public listing on the London Stock Exchange in July 2021, but progress has been stunted throughout the majority of 2022 as global markets turned away from the cannabis industry and towards more traditionally risk-averse investments.
Ongoing Concerns
While growing levels of investment in German cannabis are undoubtedly a net-positive for the European industry, some concerns remain.
In a recent interview with BusinessCann, German importer and exporter AlephSana‘s Co-Founder and Managing Director Boris Moshkovits said that recent valuations risk detaching from reality, and threaten to see a repeat of the mistakes made in Canada in 2018.
With its last publicly reported revenues at the time of listing topping €5m, Cantourage’s price-to-sales ratio, a measure often used to value growth stocks that have yet to turn a profit, is currently 57.
This drops to 19 if the company manages to achieve its target of €15m in sales this year.
Though investors paying the equivalent of €16 for every €1 of sales may seem high, for reference Canadian giants Canopy Growth and Aurora had a price to sales ratio of 43 and 115 respectively when they listed in 2018.
This valuation is likely to be linked to the potential of the upcoming German adult-use market, a market Cantourage has been clear about its intentions to target.
However, the company’s business model relies on importing cannabis flower from around the world to undercut its competitors on price.
As the proposed German regulations currently stand, this would leave Cantourage unable to sell any cannabis to the adult-use market as it is not grown domestically, unlike rivals Aurora, Tilray and Demecan who currently have the only three tenders to grow cannabis in Germany.
