The world of cannabis is evolving. No longer fragmented with no leaders or standards, sitting in the shadows, spoken only in hushed tones, forever awaiting recognition and acceptance. Today, cannabis has emerged as a legitimate business opportunity and long-term investment prospect.
As progressive legislation sweeps the globe and consumer demand for the CBD market grows alongside the evidence base for the use of medical cannabis as an effective medicine for a host of conditions, the potential is limitless.
Cannabis is now firmly on the City’s radar. Following the changes by the Financial Conduct Authority (FCA) allowing medicinal cannabis companies to list on the LSE, the UK has seen a flurry of activity.
In February alone, we have seen some positive and somewhat game-changing market indicators that the industry will flourish. Two medical cannabis companies MGC Pharmaceuticals and Kanabo Group make their stock market debut. Both enjoyed strong stock prices since listing. This comes under some colossal mega M&A activity with UK-based pharmaceutical firm, GW Pharma – which specialises in a cannabis-derived treatment for epilepsy, being bought by Jazz Pharmaceuticals in a £5.3bn takeover.
There have been some global shifts too with cannabis companies Tilray and Aphria Inc. announcing a merger (December 2020) to create the world’s biggest cannabis producer by sales. The merger will reportedly result in a company with a pro forma revenue of $685 million. More deals, listings and market activity will follow that will super-charge the development of a legitimate cannabis industry. These changes alone, illustrate how far out of the shadows cannabis has come.
We are now beginning to see venture capital funds, hedge funds, institutional private equity firms, Special Purpose Acquisition Companies, and Exchange Traded Funds (ETFs) taking a deeper interest in the cannabis space. Investors now want to capitalise on the excitement without getting caught up in any misplaced and hyped-up companies.
We look at some of the cannabis investment companies that are looking to showcase their cannabis market expertise and create real value for investors:
Founded in early 2020 and with plans to list on the LSE in 2021, this investment holding company focuses on selective investments across all verticals of the legal medicinal cannabis industry.
Headed by CEO Carl Esprey, Botanical Holdings has a specialist team consisting of experts in agriculture, agronomy, product development, and pharmaceuticals, Botanical Holdings also provides operational management to its risk-adjusted portfolio of companies within this sector. Included in its acquisition portfolio is EuroCan, a Portuguese-based company that aims to become a world leader in the production of high-quality cannabis products and medicinal extracts.
Rize ETF is a specialist thematic ETF issuer looking to maximise on industry trends for investors. It has created a Medical Cannabis and Life Sciences UCITS ETF (FLWR) which looks to invest in medical cannabis with a focus on companies in the biotechnology/pharma and hemp and cannabidiol (CBD) sectors. FLWR can provide investors exposure to a variety of products that go beyond sectors, size, and geographies. Their insights and classifications are based on research and tech-driven analytics from cannabis data firm – New Frontier Data.
Buoyed by the Biden win and expected cannabis policy changes combined with the recent Reddit trends, cannabis ETFs have performed well. The $44.1m Rize Medical Cannabis and Life Sciences UCITS ETF (FLWR) returned 45.2% so far this year, (figures as of 12 February 2021), while another ETF that provides targeted exposure to the rapidly expanding legal medical cannabis – HANetf’s $54.3m Medical Cannabis and Wellness UCITS ETF (CBDX) also jumped 43.2%.
World High Life PLC
Soon to be renamed Love Hemp Group plc, this investment company based in Canada has a strategic focus to invest and/or acquire companies operating in the CBD wellness and medical cannabis industry.
World High Life’s first acquisition was Love Hemp in 2019 – a popular British CBD and hemp brand that supplies over fifty products across several retail listings in the UK in a deal worth £9m. The deal is reflective of the company’s investment strategy to build a European foothold.
In early November 2020, the company completed a fundraising round totally nearly £400,000 through a private share subscription that will be used to conduct due diligence on further investment opportunities.
The group intends to build on the momentum from its Love Hemp subsidiary and is now “actively considering” investment targets in the medicinal cannabis space. Potential targets include new technologies, pharmaceuticals, synthetic cannabinoids, CBD, and hemp with potential for wide applications in multiple jurisdictions.
Verdite is a legal medicinal cannabis fund based in Guernsey and an offshoot of London-based Chrystal Capital Partners, which was co-founded by Kingsley Wilson 11 years ago. Verdite is supported by a team of 11 sector experts which include Colin Stott, former R&D Director of GW Pharmaceuticals. The $100m fund plans to make some investments in the spring of 2021 and interested in deploying capital across various aspects of the cannabis ecosystem including genetics, medical education platforms, private clinics, consumption devices, and consumer products.
They pride themselves on their due diligence and analysis processes to identify companies that will create real value and return to give them access to the capital they need to grow.
Based in Paris, ÓSKARE CAPITAL, launched a AIFM and ESG compatible fund (domiciled in Dublin) with an investment focus on innovative companies and teams in the medical cannabinoid industry.
The fund will prioritise investment in the development of medical and pharmaceutical products where there is a strong scientific rationale and solution being used to utilize cannabinoids. The fund aims to have a balanced portfolio of companies that are developing highly effective and disruptive technologies, services, and solutions. With a focus on scientific innovation, the fund invests in opportunities that can create meaningful patient outcomes, strong returns for investors, and advance the industry.
It is chaired by industry veteran Bruce Linton, former CEO and founder of Canopy Growth, and supported by a team with a strong scientific background and track record in medicine, engineering, chemistry, venture capital, and intellectual property.
Oskare Capital has already performed its first investment in Copenhagen-based synthetic biology firm, Octarine Bio which is developing radical new cannabinoid molecules for use in treatments for neurological and psychological conditions.