HELLENIC Dynamics became the first pureplay cannabis cultivator to list on the London Stock Exchange (LSE) last week after nearly two years of negotiations with the FCA.
The UK-headquartered medical cannabis grower initially announced its intention to list in early 2021, hoping to ride the wave of cannabis optimism and become the fifth company to list on the LSE that year.
Instead, its long-fought regulatory battle has seen it break through market headwinds to list in a much different environment.
With funding secured and term sheets already in place, the company is poised to hit the ground running despite the delays, providing hope for companies hoping to follow in its footsteps in 2023.
Long Road to IPO
Hellenic Dynamics, founded in 2018, first announced its intention to go public in early 2021 via a reverse take-over deal with AIM-listed cash shell, UK SPAC.
At the time, MGC Pharmaceuticals had just become the first cannabis company to see its stocks traded on the LSE in its 320 year history.
Hellenic became one of many hopefuls keen to capitalise on a landmark change in legislation which ‘opened the door’ for cannabis companies to access major public markets.
This prospective RTO gathered momentum in May 2021 when Kanabo, which followed MGC onto the LSE just days after its IPO in February, signed a memorandum of understanding for a supply deal with Hellenic.
As part of the deal Kanabo agreed to purchase up to 1000kg of cannabis flower a year from Hellenic, while committing to purchase £750,000 worth of shares in the company when it went public.
In August 2021, the proposed RTO was made official, seeing UK SPAC suspend its shares from AIM and announce official terms, which valued the deal at £45.2m with 9.5bn new shares to be issued at a price of 0.472p each.
In early September 2021, Hellenic’s CEO Davinder Rai told BusinessCann that the company expected ‘to join the LSE before the end of October at the latest.’
This marked the first of numerous missed deadlines, as the complexity of satisfying the FCA’s rigorous requirements became apparent.
“We had initially intended to list around October last year, having submitted the first cut of the prospectus to the FCA in August. However it became quite apparent that as a fully fledged medical cannabis cultivator producing THC dominant products it wasn’t going to be an easy process,” Mr Rai told us this week.
After the longstop date for the deal was extended in November 2021 to the end of January 2022, Hellenic explained that the delays were due to a change in legislation which required it to prove its operations in every country, including cultivation in Greece and distribution in Germany, meet UK law.
“We had to take a belt and braces approach with the FCA to confirm our operations in every territory we operate and hoped to operate in, met UK law. We had to produce a number of legal opinions in various territories and then have these underpinned by a KC in the UK,” Mr Rai continued.
After the January 31, 2022 deadline was missed another two long stop extensions came and went, with UK SPAC warning investors in February that there could ‘be no certainty that the acquisition will complete’ while the process continued to ‘take more time than had been originally envisaged’.
In early November 2022, following nearly a year of radio silence, Hellenic announced that its final prospectus had been submitted to the FCA, before being approved later that month.
On December 5, 2022 Hellenic listed 10.4bn shares at 0.3p per share under the ticker ‘HELD’, seeing the company valued at £31.2m.
Mr Rai said: “The admission maybe later than we all anticipated, but we’re still the first cultivator on the LSE Main Market and we’re also one of the handful of companies that have gone public this year – taking into consideration market conditions I think that the whole team should be proud of this achievement.”
Since listing last week, Hellenic’s shares have struggled to hit the 0.3p listing price, falling to lows of around 1.5p and highs of around 2.6p.
It is understood that part of this price compression was due to ‘teething problems’ during its inaugural trading days, which meant investors were unable to purchase Hellenic’s stock through a number of platforms.
In a response to one investor, Hellenic said the issue is believed to be down to ‘internal compliance’ issues stemming from the company’s relationship to cannabis cultivation.
The listing also saw Hellenic raise £1.125m in an oversubscribed fundraise, which it says it plans to use to ‘expand its total cultivation area in line with European demand’.
“This fundraise coupled with the funds from SPAC provide Hellenic with £2,626,000. The funds will be used to accelerate our development and strategic plans which are to fulfil two term sheets for offtake of THC dominant medical cannabis products into Germany’s advanced medical cannabis market, secure further supply lines into the UK, and increase our total cultivation area in line with European cannabis demand,” Mr Rai added.
The ongoing fallout from COVID, war in Europe and rising global inflation had seen investor sentiment turn sharply away from cannabis in the time since Hellenic first began its IPO process, seeing tens of millions wiped off the market value of its LSE-listed stablemates.
Hellenic subsequently listed nearly 1bn more shares, at 1.72p less than initially intended, achieving a market valuation of £31.2m, some £14m less than originally proposed.
Though it was unable to be part of the initial green rush onto the LSE last year, its long fought battle and success in listing amid such unfavourable conditions is arguably more significant.
Mr Rai concluded: “Our listing has certainly attracted the attention of investors and interested potential partners.
“I can’t comment on which companies may or may not list on the public markets next year but what I do know is that those companies with a clear narrative and compelling commercial proposition should do well given the rapidly expanding regulated, recreational and medical cannabis arena.”