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Who’s Next For The LSE – And Are We Seeing A European Cannabis Bubble?

WITH a flurry of activity on the exchanges in the last month the question on the lips of many is which cannabis company is next for the London Stock Exchange?

Following their February flotations MGC Pharmaceuticals, Kanabo and Cellular Goods have risen by over 300%, 400% and and 140%, respectively, 

These mirror upward movements elsewhere in the global markets following the US Elections late last year which marks the dawning of a more liberal approach to cannabis from President Biden and the Democrats.

In a step-change for the UK, in September last year that the Financial Conduct Authority announced it was easing restrictions on cannabis companies floating on the London Stock Exchange.

And – following last month’s triumvirate – a number of companies are now believed to be looking to the LSE.

The Second Wave

The first, of this second wave, may well be Oxford Cannabinoid Technologies (OCT) – an innovative, UK-based biotech working with Oxford University.

Unlike the trio of predecessors OCT will look to develop cannabinoid-based medicines by following the traditional regulatory pathway of Randomised Controlled Trials.

Its co-founder, tech and cannabis entrepreneur Gavin Sathianathan declined to comment on the speculation, however, if it does list on the LSE it will aim to emulate the trajectory of its UK predecessor and global cannabis leader – GW Pharmaceuticals which recently agreed to a £7bn sale.

Jersey medical cannabis cultivator Northern Leaf recently announced it is on a pre-IPO fundraising round with the LSE in sight. UK CBD firm Cannaray is also looking to the LSE and is currently raising over £15m at a slated valuation of £70m. It owns Therismos which is a £20m annual revenue wholesaler of unlicensed medicines, as well as Love CBD.

Private Or Public?

The Alphagreen Group is also said to be considering the LSE or Nasdaq in Sweden – it has a number of Swedish investors.

Its CEO Alexej Pikovsky would not be drawn on the speculation but went on to say: “There is also a lot of private capital available and when it comes to building a technology business it may make sense to stay private for longer, rather than IPO too fast.

“Examples include other marketplaces and The Hut Group which was raising in private markets for 10 years before they listed for £7bn.

“As a CEO it can also be tricky operating a business where you have 10% to 30% daily changes in your share price and your company valuation; which is still the case in cannabis given so many unpredictable changes on the regulatory side.”

Other companies in the frame for the LSE include leading global data and canna-tech firm Prohibition Holdings and patient-facing medical cannabis business The Lyphe Group.

EMMAC Life sciences had also been a potential market entrant but this will not be happening now after it was bought by Curaleaf for $350m.

UK: A Centre For Cannabis Finance

The London Stock Exchange is the largest in the Europe and the sixth largest in the world with access to a deep capital pool and a valuation of over £4 trillion – twice the GDP of the UK. 

David Hitchcock, OBE, is Chairman of London-based States Bridge Capital which is currently engaged with a medical cannabis business looking to the LSE.

He believes London is set to play a significant role financing the growth of the European cannabis industry. 

He told BusinessCann: “It has been truly exciting to see the recent set of medical cannabis IPOs in London. London is fast becoming the European centre for cannabis financing and the after-market performance of these companies has been highly encouraging. 

“We at States Bridge Capital are very excited to be engaged on the upcoming IPO of a great British success story in this space.”

Northern Leaf advisor Tristan Gervais, Chrystal Capital’s Head of Cannabis advisory, agrees: “We are in active discussions with multiple medical cannabis companies looking to IPO or dual-list in London. We are also seeing strong client demand to invest in quality, private medical cannabis companies, such as EMMAC and Northern Leaf.”

M&A Activity

Mr Gervais also noted the uptick in M&A activity in the sector over recent months, saying:  “EMMAC’s $388m sale to $14bn Curaleaf, the leading US cannabis multi-state operator, is a game-changer for the European cannabis market. We were delighted to advise on EMMAC’s oversubscribed £15m convertible loan note in December 2020.”

He highlighted how both the pharmaceutical and tobacco industries have entered the sector, with Jazz Pharmaceuticals acquiring NASDAQ-listed, GW and British American Tobacco investing £125m into Canadian licensed producer Organigram. 

He added: “We expect the inevitable federal legalisation of medical cannabis in the US to drive significant further M&A in the sector, including outbound to Europe.

“The European cannabis industry is in play.”

‘Crazy’ Valuations 

On February 26, Cellular Goods listed and within a few hours of trading it had soared to over 20p from its launch price of 5p giving it a Market Cap of over £100m – with zero revenues.

Its subsequent fallback to a little over 10p has been disappointing some of the 6,000 retail investors it attracted to the IPO.

It’s fair to say the reaction of Geremy Thomas, interim CEO and founder of the UK’s Sativa Wellness Group, is all together different.

He returned to a hands on role in Sativa last month and feels frustrated by recent events. “We are undervalued if you compare us to the newcomers to the LSE who have values of £100m whilst we are still lurking below around £20m.

“We still have lots to do and I am on to it – but why should they be £100m and me be £18m when I’ve got a proper business with a proper structure, one that is making stuff?

Sativa is listed on the Canadian Securities Exchanges, the AQSE in London and junior markets in the US and Germany.

Mr Thomas continued: “My job is to ensure we prosper; we recently secured more cash to put into the business, to expand the wellness side and continue with our significant progress in the CBD space.

“There is a big difference between what we are doing and what these other companies are saying they might do in the future. 

“There is a disparity of valuation – this is a challenge and this is why I’m back at the helm. We are a leader in this space; we have been around for quite a while and will be for some time to come.”

Is This A Market Bubble?

The emergence of a legal cannabis industry in North America was dubbed cannabis 1.0 and the 2019 second wave of Canadian cannabis retail products became known as Cannabis 2.0.

That year also saw massive market correction as as the over optimistic demand projections failed to materialise leaving many investors out of pocket – black market cannabis still accounts for almost half of the Canadian market.

One London merchant banker approached by BusinessCann described what was happening on the LSE as a ‘bubble’.

He said: “There is a lot of interest in cannabis on the public markets at the moment but there are just a few companies.

“What we are seeing is investors getting into the sector, without actually having a view on the companies, they see it as cannabis and they see the investment as opportunity an access to the sector.

“But do they actually know what the company does? I may be doing a dis-service to these companies but it looks like many are investing simply because it’s cannabis.”

Cannabis 3.0 


With cannabis coming in from the cold across the globe we are now said to be entering the era of Cannabis 3.0. 

Narbe Alexandrian, of investors Canopy Rivers, highlighted this recently saying: “The end of cannabis prohibition across multiple geographies will open up the industry to R&D and financial activities such as banking and insurance which we take for granted in other industries.”

Mr Pikovsky aligns with this sentiment whilst also acknowledging the immediate impulses driving the market saying: “Its fair to say that some investors are playing the short term game given they know there is huge demand for cannabis stocks and there is a current scarcity in the market.

“However, they also know that in the long term, even if there is a correction in the market cannabis seems to have reached an inflexion point – and the global momentum now seems almost unstoppable.

“The market will continue to grow, we will continue to see more capital and more companies coming to the London markets and so it is still fine to invest in cannabis, albeit with a very, long-term view.”

Speaking to BusinessCann as it debuted on the LSE Kanabo CEO Avihu Tamir said there may be as many as 50 cannabis companies trading on the exchange within a few years – he may well be right.

Existing LSE Cannabis Players

There are currently three companies on the LSE with cannabis connections – aside from the recent trio of arrivals.

CBD firm Zoetic International was previously an oil and gas explorer known as Highlands Natural Resources. Imperial Brands has stakes in Auxly Cannabis Group and OCT and Associated British Foods cultivates cannabis for GW Pharmaceuticals.

Around a further 10 cannabis companies are listed on London’s junior markets including: Ananda Developments and Sativa Wellness and the AQSE Market.

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