The Financial Conduct Authority (FCA) gave the green light for CRBs looking to float on the London Stock Exchange (LSE) on 18 September 2020. Since then, there has been an influx of cannabis stocks looking to take advantage of the lucrative capital markets in the UK and investor appetite has never been higher.
Although the announcement by the FCA is big news for UK capital markets and the medicinal cannabis industry, the nation has already seen several listings of CRBs on the Aquis Exchange (AQSE). The AQSE is a pan-European stock exchange based in London, which currently has CRBs such as Sativa Wellness Group, Greencare Capital, Freyherr International and Ananda Developments listed on the AQSE Growth Market.
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UK-based medicinal cannabis and CBD stocks are now able to float on the LSE as long as they hold the appropriate Home Office licences and for companies based overseas, operations need to be deemed legal under UK jurisdiction.
The London Stock Exchange’s attraction for cannabis stocks
The LSE is an attractive opportunity for the cannabis industry. As one of the largest stock exchanges in Europe, with combined market cap of around £3 trillion, the LSE offers a large investor base and has been a go to exchange for a number of reputable companies.
Listing on LSE’s main market requires a minimum market cap of £700,000 and a number of other stringent regulations that companies must comply with. Therefore, many CRBs, which tend to be in their early stages when coming to market, look towards a listing on AIM or London’s AQSE growth market.
There have already been two successful entrants to London’s main market this year. Spinnaker Opportunities, a cash shell/special purpose acquisition company (SPAC), has allowed Kanabo Group [LON:KNB] to list on the LSE through a reverse takeover.
“The listing will provide additional capital, which will enable Kanabo to continue to invest in the development of its formulations and vaporisation delivery devices and, in building its sales and distribution network, will bring its prescribed medical products and over-the-counter CBD products to more patients and users.,” said Chairman of Spinnaker Opportunities, Andy Morrison.
Morrison mentioned that “a listing in London offers cannabis stocks access to a deep and liquid pool of capital that is rivalled by few financial centres around the world. London has lagged behind other global centres in the listing of cannabis companies, and this has created an imbalance between pent-up investor demand and the limited supply of high-quality public company vehicles in which to invest.”
MGC Pharmaceuticals [LON:MXC], a European-based biopharma company, focused on developing and commercialising phyto-cannabinoid derived medicines, is one of the players that worked with the FCA to allow companies in the industry to float on the London capital market. MGC was the first company to complete a full day of trading on the LSE in February 2021. The company has taken a dual-listing approach to broaden the investor base for its European operations as well as investors from the Middle East and Africa.
“This is a process we’ve been engaged in for around two years, where we saw the UK market as a very viable place to establish a European market presence,” said MGC Pharma Vice-president of business development and international relations, Ron Lipsky. “We’ve been looking for opportunities to list in closer markets, and the LSE has always been something of a paragon. It is a very respected market, as London is considered a hub of international finance. We want our products to be provided by the NHS and insurers globally. The UK is a good example of a public health system that can support coverage for our products. Once they are accepted by the NHS, the UK instantly becomes a very compelling and interesting market.”