Europe’s Capital Markets Poised To Open-Up To The Cannabis Industry

THE European public markets are still a capital cocoon for cannabis with regulatory issues and the recent Canadian market crash stymieing release, delegates at the first day of a two-day global conference heard.

Covid-19 has seen Prohibition Partners’ annual Cannabis Europa event migrate online; Renamed Prohibition Partners Live it comprises five sector themes and geographies.

Will Muecke, of Artemis Growth Partners.

On day one, a discussion on ‘Raising Capital In Europe’ saw corporate cannabis lawyer Nick Davis, of Memery Crystal, Will Muecke, of Artemis Growth Partners and Paul Gurney, of BMO Capital Markets quizzed by host Charlie Webster of the BBC.

London-based Mr Gurney focuses on cannabis investment opportunities in Europe for BMO; the investment banking arm for the Bank of Montreal.

In 2018, it became first bank to underwrite the sector with a $200m placing for Canopy Growth, which was all secured from European investors.

Investment Has Dried-Up

He lamented: “Public markets are disappointing, down 60% from this time last year when they were at an all-time high. That doesn’t attract investment money, so it’s still private money from high-net worth individuals, for now.”

He later elaborated on how the fall-out from Canada’s crash is impacting investment decisions across the globe, when asked specifically about opportunities in low-cost jurisdictions, such as Africa.

“Two years ago there was risk appetite anywhere in world. Now Africa is  being viewed as too high-risk. If a business has an asset in Portugal or the UK, or a mature market, that is where they are focusing their efforts; investment has, effectively, dried-up.” 

However, he went on to say there are signs of improvement “We’re at bottom and there is an argument to be made that this is the time the smart money is looking to buy from the Licensed Producers, those who bought their assets at large valuations, and now need to preserve cash.”

He went on to say it may still take a while for the European public markets to be active, but said there is still private money available, for some. 

A Disappointing 12 Months

Mr Davis recalled how last year, at Cannabis Europa 2019, he was ‘very bullish about the public markets stepping in to fund a number of projects’.

He continued: “But we’ve struggled to get UK public markets up-and-running and the capital has not happened, it is still reliant on private funding.”

He says this is not wholly due to Covid-19 saying there are issues with market regulators. Although he did not elaborate this recent release from London Stock Exchange’s Spinnaker references these.

He said: “It has been a disappointing 12 months, but hopefully we will see things in better shape in 12 months time.”

With patient access still lagging in the UK the market is not developing as rapidly as had been hoped. However, he said cannabis businesses are continuing to look to the long-term and see great potential for medical cannabis in the UK and Europe.

Regulations Required

With public capital scare private equity players such as Artemis Growth Partners are stepping in to support the European industry, said Mr Davis.

Will Muecke, of Artemis Growth Partners, a recent interviewee with BusinessCann says it is currently exploring opportunities in the UK following its recent Bridge Farm purchase.

“The CBD space is of interest. We see a lot of value with a lot companies having headroom to grow based on the projections of market size. It’s a case of looking for businesses with the traction and staying power to deliver a revenue model that can be sustainable.”

While highlighting the on-going issues in relation to Novel Food compliance in Europe he said it supports the route to regulation, ‘so customers know that what is on the shelf, and on the label is in the bottle’

He says a lot of time and money will be needed to deliver compliance and remarked how this will vary for topical and ingestible products.

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