High hopes for investors in medicinal cannabis as flurry of IPOs expected

The legalisation of medicinal cannabis in the UK last November has seen London emerge as a new hub for companies to list.

Sativa Investments is currently the only pure-play medicinal cannabis company listed in London but that seems to be about to change as a batch of medicinal cannabis firms look set to target London’s well-heeled investors.

Proactive Investors quote an analyst from a top investment bank saying : ‘We are working very hard to get a number of companies listed in London …we anticipate that there will be several that we have listed by the end of this year.’

He thinks Europe is in the early stages of a growth industry as there is a ‘very meaningful’ end market with a ‘meaningful set of companies’.

European Cannabis Holdings is among the medicinal cannabis firms understood to be eyeing a stock market listing this year; it has raised £6m from investors to date and is expected to float in London to support the development of three medicinal cannabis clinics in the UK.

Israeli Kanabo Research is another reportedly planning to list in the UK by summer; it has developed a vaporiser medical device called VapePod that allows people to inhale CBD oils, is expected to float on London’s main market by summer.

Jacana, the medicinal marijuana firm founded by Jamaican entrepreneur Alexandra Chong, is said to be considering an IPO on London’s junior AIM market.

Outside of medicinal use, a number of companies that are already listed in London have dipped a toe in the sector.

Oil and gas firm Highlands Natural Resources, which trades on the main market, raised £1.3m to set up a cannabis operation called Zoetic Organics to grow hemp and sell products such as organic hemp oil.

‘UK’s first cannabis investment vehicle to float when it listed last March on the NEX exchange, since when its shares have doubled in value’

Sativa Investments was the UK’s first cannabis investment vehicle to float when it listed last March on the NEX exchange, since when its shares have doubled in value; Imperial X, also listed on NEX, plans to launch a cannabis business after its mining investment firm failed.

The analyst continued: ‘It is my judgment that by the end of this year there will be half a dozen listed cannabis companies in London of meaningful scale and that we would be involved in a good chunk of them. That’s just the beginning because if you look at all of these companies they are all relatively conservative cannabis plays … they are very medicinally focused, and there is a lot more scope for the industry beyond just that and there is huge scope for volume growth in the short and medium term.’

Companies listing in London will hope to emulate the success seen in Canada where there has been a rapid rise of cannabis companies since the country legalised recreational cannabis last October and valuations surged.

However, some critics have drawn comparisons to the boom and bust of bitcoin, which has experienced extreme price volatility.

Medicinal cannabis certainly seems likely to be a growth industry, as it were, in the near term, and as ever investors are advised to do their homework into the fledgling sector before parting with their hard earned; inevitably there will be funds that increase their exposure in line with increasing awareness and demand and that may be a good solution for those seeking some exposure, but not yet comfortable picking individual stocks.