This week was another difficult week for London Stock Exchange (LSE) listed cannabis companies, with every one of BusinessCann’s tracked stocks reporting declines, including the recent AIM debutante Celadon Pharmaceuticals.
While cannabis stocks failed to make significant headway anywhere this week, with numerous Israeli stocks reporting double digit declines and NASDAQ-listed Akanda suffering huge losses, news of disappointing economic data in the UK weighed down the majority of the market.
Following news that GDP dropped 0.1% in March, fears of a looming recession saw the FTSE100 drop aroudn 2% yesterday, while the FTSE 250 experiences similar declines, wiping out the progress made in the previous two sessions.
Akanda’s stock has dropped below its opening price of $4 for the first time since it went public on the NASDAQ on March 15 following a brutal week of trading.
On Monday May 9, Akanda’s stock divebombed nearly 75% despite there being little in the way of news or developments from the company.
Its stock fell further throughout the week, dropping from $9 to just $1.23 at the time of writing, wiping more than $200m off its market cap.
Since its IPO, the British cannabis cultivator has been somewhat of an outlier in the cannabis industry, seeing its stock consistently outperform almost all of its rivals, particularly on the NASDAQ.
Many investors have now been left questioning the reasons behind this near 90% drop in value, with many cashing in on the chance to purchase the stock in the hopes it will rebound in similar fashion.
On Tuesday, following the dramatic drop, 3.4m shares were traded compared to the average of just over 500k.
Around 77% of Akanda’s shares are currently held by ‘insiders’, who are understood to still be under a 365-day IPO ‘lock-up’, meaning they cannot yet sell their shares.
Celadon, another relatively new cannabis stock, also had a difficult week on the LSE’s AIM market, seeing its stock drop 10%, adding to a near 20% drop since the beginning of May.
Two weeks after Akanda listed on in the US, Celadon became the first British cannabis company in 21 years to join AIM, following a reverse takeover deal with Vertigrow Technology.
Like Akanda, Celadon had seen its share price perform relatively well since admission, sitting at around 120p for most of April, dropping from 158p at admission.
However, on April 28, the company reported a huge spike in pre-tax losses for the 16-months to December 31 2021, jumping over 300% year-on-year to £720,369.
It told investors that this dramatic increase in losses was due to ‘increased M&A activity and a portion of transaction expenses being incurred and settled in pursuit of the Company’s inaugural acquisition’ of Vertigrow on March 28, before rebranding as Celadon.
Year-on-year its cash and cash equivalents also fell from £5.5m to £4.5m as of December 31 2021.
The Israeli cannabis operator has seen a gradual decline in its stock value since it spiked in August last year at 25p.
However, after levelling out at between 6p and 7p for most of 2022, it has dropped by a further 30% since late April, now trading at just over 4p.
While this coincides with a wider drop in Israeli cannabis stocks since the beginning of April, the more pronounced decline is thought to be related to growing investor concerns surrounding the company’s deal with Materia.
Kanabo announced back in July 2021 that it has signed a “non-binding term sheet” with Materia, which has subsidiaries in the UK, Germany and Malta, for a multi-million pound acquisition which would see Materia fully integrated into Kanabo.
Materia was given immediate access to a loan facility of around £1.4, with nearly £300k of this available immediately, with the rest subject to it reaching certain milestones six-months from the deal date.
Four months later, Kanabo released an update on the acquisition, announcing that it had ‘finished the majority of its due diligence work’ and had signed a ‘revised term sheet’ with Materia.
This included the agreement of an all-share acquisition, valuing Materia at CAN $20m (£12m), which will be paid for via the issue of new ordinary shares in the company.
Since this update in November, in which time Kanabo’s share price has dropped more than 70%, there has been radio silence on the progression of the acquisition, leaving many investors to question whether it is still going ahead.