AS European Cannabis stocks continue their battle against external market forces, it has been internal battles which made the headlines this week.
Major stakeholders of two separate London Stock Exchange (LSE) listed companies called for general meetings this week, demanding votes on sweeping changes to their corporate governance and the ousting of C-level executives.
Oxford Cannabinoid Technologies
In yet more dramatic news for the embattled pharmaceutical company, its Co-creator Gavin Sathianathan publicly released a letter making a swathe of scathing accusations about the conduct of its board.
Mr Sathianathan, who stepped down from OCT in November 2021 after the company breached market rules in a damaging share deal, called for a general meeting to vote on whether all of the company’s current directors should be replaced.
On Thursday he followed this up with a letter, detailing the reasons behind his decision to call for a general meeting, and putting forward proposals to save OCT’s share price, which dropped a further 30% following the news.
The letter largely focuses on the composition of the company’s eight board members, a number which Mr Sathianathan calls ‘wholly excessive for a company of OCTP’s size’, and calls for three new and experienced candidates to take their place.
“Of these eight Board Directors, one breached lock-in arrangements while in the position of Executive Chairman, one lacks any relevant credentials or interest in the role, and two have ‘Big Tobacco’ experience. OCTP’s disappointing performance since IPO is, in no small part, attributable to this weak Board structure.”
A more immediate concern for investors will be the points made about OCT’s financial position, highlighting the fact that as its market cap is now well below the LSE threshold of £30m, it could be delisted.
More pertinently is its apparent inability to secure a broker following the departure of States Bridge Capital in November 2021, with many institutions reportedly seeing its governance issues as being too serious to take it on.
Without solving this issue and getting a handle on its share price, now trading at new lows, OCT will be exposed to vultures when it runs out of capital in 12 months time, and could struggle to raise any funds in the meantime.
BusinessCann will be reporting on the developments at OCT in more detail later this week.
Earlier in the week Love Hemp was subject to a similar vote of no confidence from its investor Pershing, who owns around 5% of the company’s total paid up capital.
Pershing called for a general meeting for investors to vote on the removal of Love Hemp’s chairman Andrew Male, alongside 75% cuts to directors’ remuneration packages and the cessation of all marketing spend.
Unlike with OCT, no details were given as to the motivations behind these proposed resolutions, however they touched on a number of historically contentious issues for investors.
Since the extraordinary general meeting was announced earlier this week, Love Hemp’s board has issued an official response to all five resolutions.
To the fifth resolution, which calls for a stop to Love Hemp’s multi-million-pound marketing spend, the board showed little sign of changing its position.
“As the company is still at its growing stage, the Board believes that marketing of its brand is key to its success.”
Meanwhile some other investors raised concerns about the increasing number of shares in issue, leading to ‘huge dilution’ for investors.
Israeli pharmaceutical firm Panaxia saw a double digit drop of around 13% last week.
Panaxia’s stock price has been on the downturn since 2019, but its drop-off has become increasingly steep since the start of March.
The poor performance is likely to be a reaction to the company’s increasing debt pile, detailed in an analysis by Simply Wall St earlier in the week.
In the year to September 2021, the company’s debt has skyrocketed from ₪662.0k to ₪7.71m, with cash reserves of ₪1.61m offsetting net debt to around ₪6.10m.
According to its most recent balance sheet Panaxia also had liabilities totalling ₪17.6m, more than both its cash and near-term receivables.
While it has a market cap of just over ₪102.1m, meaning this is likely manageable in the near term, its most recent EBIT loss of ₪19m is unlikely to inspire confidence from investors moving forward.
Israeli Cannabis Stocks
Elsewhere, stocks in both Intercure and Seach Medical Labs also dipped this week, with the former seeing a drop of over 7%.
While this is undoubtedly a symptom of the ongoing global market turbulence in the wake of the war in Ukraine, some investors attributed Israel’s growing shift towards the recreational market.
According to the Jerusalem Post, President Isaac Herzog and Justice Minister Gideon Sa’ar announced on Sunday plans to expunge the criminal records of those who have been convicted of possessing or using cannabis for recreational purposes.
This followed proposals in February for an amendment which would see the possession of cannabis be considered an administrative offence, rather than a criminal one.
With one of the most developed medical and pharmaceutical cannabis industries in the world, some investors believe the launch of a recreational market could impact this flourishing sector, cannibalising market share and potentially offering a cheaper alternative for existing patients.