MGC Pharmaceuticals
MGC Pharmaceuticals, which became the first cannabis company to list on the London Stock Exchange (LSE) in 2021, informed investors this week that due to adverse market conditions it ‘finds itself at a critical financial juncture’.
It is now in the process of implementing a restructuring plan, and is preparing to launch a drastic share consolidation and heavily discounted share issue to raise capital.
In an update to investors this week, the company announced that despite ongoing ‘material operational achievements’, its share price has ‘failed to appreciate’, falling over 98% since it listed.
This has meant that over the last two years, MGC has ‘faced extreme difficulties in raising funds’, leaving the company without the ‘medium to long term’ financial stability it requires.
According to its latest financial figures covering the year to June 30, 2023, MGC raised £1.2m during the year through a placing of new shares, and post period raised around £1m via another placing and a separate share purchase plan.
Meanwhile, while the company recorded total revenues for the period of A$3.4m, down from A$4.7m a year earlier, MGC reported an operating loss of A$21.1m.
In an effort to extend its current financial runway, MGC has now announced plans to implement a financial restructuring plan, aiming to ‘reduce (its) reliance on constant capital raising and allow us to complete an 18-month work plan’.
It has now requisitioned a shareholder meeting to vote on a 1000-1 share consolidation, which would see its number of shares in issue drop from 4.4bn to 4.4m.
Furthermore, MGC is proposing an issue of up to 31m new shares at an 80% discount to the stock’s average price on the Australian Stock Exchange, alongside the issue of 15.5 million options over further new shares, on the basis of 1 option for each 2 new shares.
“We understand this restructure will be difficult for many shareholders,” the company said.
“However, in light of dire alternatives, the board and management believe this is a necessary action to help to sustain the company’s future and financial security beyond the short to immediate term.
“On behalf of the board, we hope to have your continued support as we invite you to be part of our necessary restructuring to continue on the path to provide innovative medicines globally to meet unmet medical needs.”
The Medical Cannabis and Wellness UCITS ETF (CBDX)
The first medical cannabis exchange traded fund (ETF) to be listed in Europe is set to be merged with a second fund, as it is ‘no longer viable’.
HANetf launched its Medical Cannabis and Wellness UCITS ETF (CBDX) fund in January 2020, managing assets of $8.6m in ‘medical cannabis, hemp and CBD industry across 9 thematic sub-sectors’.
After experiencing an initial slump in the early stages of the COVID-19 pandemic, the fund saw its value spike throughout the rest of the year, reaching a peak in February 2021.
However, as seen across swathes of the global cannabis sector, its value has gradually declined and now sits around 83% below this peak.
With HANetf stating that it expected no improvement in value ‘in the short to medium term’, it now plans to merge the fund with a wider healthcare ETF, HAN-GINS Indexx Healthcare Megatrends Equal Weight UCITS ETF (WELL).
On September 15, shareholders of CBDX voted in favour of the merger, which its directors said was ‘an alternative to closure’ which will present investors with ‘an opportunity to retain exposure to a portfolio with a similar investment objective, but without the exposure to the cannabis related securities.’
“Over the past two years, the medical cannabis sector has experienced increased compression and a narrowing universe, exacerbated by unfavourable market conditions,” the company said in a statement.
“These developments have been reflected in investor sentiment and led to CBDX no longer being viable.”
Akanda
This week NASDAQ-listed Akanda signed a new deal to acquire ‘farming land and related operational licences’.
The deal, which the company announced on September 20, will give Akanda the right to develop the property for two years, in an arrangement it described as ‘similar to a mining agreement where operators buy the right to mine a site’.
Akanda reportedly plans to develop both THC and CBD facilities on the site, and will make payments based on milestones achieved from development potentially totalling $4.3m.
The first ‘non-refundable payment’ of $1.8m will be made to 1107385 B.C. LTD (the land’s owner). If this initial payment is to be paid in Akanda’s shares, it will reportedly be calculated ‘based on a formula set forth in the agreement’, and split into three payments made upon signing, then 15, and 30 days after signing.
Following this initial payment, a further $500k will be paid to the owner when Akanda receives licensing for THC cultivation on the property, and another $500k when this THC crop is sold.
As part of the deal a further $750k will be paid when Akanda receives approval to cultivate hemp, and a separate $750k will be paid ‘upon CBD cultivation approval’.
