Cannabis firms head to London for £100bn POT of gold
It’s dubbed the ‘green rush’ as drug start-ups seek investors ...but now the hype is making many fear ‘Wild West’ chaos
IT’S an industry most of us associate with dingy, smoke-filled bars in Amsterdam and the more liberal states in the US and Canada.
But cannabis companies are making their way to London to tap into a £100 billion European market and cash in on the Square Mile’s so-called ‘green rush’ among investors.
In the past few weeks alone, four firms have decided to ditch their previous business plans and instead switch their focus to cannabisbased medicines.
The Mail on Sunday can reveal that Kanabo Research – which is being bought by a shell company listed on London’s main market – has chosen to list in Britain instead of Israel, where it was founded, and is expected to float by summer.
That comes after Highlands Natural Resources, which is listed on the main market, raised £1.3million to launch a cannabis operation in Colorado.
It said the new venture, called Zoetic Organics, would grow hemp and sell products such as organic hemp oil.
On the lesser-known NEX Exchange, a company called Imperial X has decided to launch a cannabis business after its mining investment firm flopped.
It will join Sativa Investments, which became the first Londonlisted cannabis investment vehicle when it floated a year ago. Since then, its share price has more than doubled to value the company at £38 million.
The fourth firm to switch focus is Block Commodities, run by the cousin of Tory party deputy chairman James Cleverly. As revealed by this newspaper last month, Chris Cleverly has turned the focus of his agriculture business to cannabis. Block, also listed on the NEX, is buying a firm with licences to grow the crop on 4,000 acres of farmland in Sierra Leone.
Another company that has been active in recent months is FastForward Innovations, which is listed on London’s junior market AIM and is chaired by Jim Mellon, a friend of Nigel Farage and a Brexit donor.
It has just invested in EMMAC Life Sciences, a London-based medical cannabis company, in its second cannabis investment in 18 months, having previously focused on backing high-tech companies.
Another company eyeing a possible listing on AIM is Jacana, a medicinal cannabis firm founded by internet entrepreneur Alexandra Chong. The businesswoman – who went to boarding school in England and previously ran a dating app – has a 100-acre farm in Jamaica, where she was born, and plans to sell medicinal cannabis to patients in North America, Europe and the UK.
Chong, whose lavish wedding to Sir Richard Branson’s nephew Jack Brockway was attended by Princess Eugenie and Kate Winslet, has raised £15 million from angel investors including London venture capital star Eileen Burbidge.
The flurry of activity will only increase as other firms pile into the European market, experts believe. Until now, the US, Canada, and Israel have led the way in cannabis floats because they were the first to relax rules on the drug’s use.
But cannabis firms are convinced the City of London’s deep-pocketed investors and bankers are ready to plough into the market, which is estimated could be worth a staggering €115.7billion (£100million) by 2028 in Europe alone, according to consultancy Prohibition Partners.
Many of the companies choosing London have been spurred on by the changes to the NHS after the rules on marijuana-based treatments were relaxed last year.
Patients can now get a prescription through the NHS for medicines based on cannabidiol, better known as CBD, but only to treat epilepsy or nausea caused by chemotherapy and only if other treatments have not worked.
But with so many companies rushing to tap London’s funds, fears are rising of a ‘Wild West’ culture that could leave private investors vulnerable to being exploited amid the hype due to the lack of regulation.
Kanabo’s founder Avihu Tamir told The Mail on Sunday he turned down ‘two decent offers’ to float in Israel in favour of a London listing through a reverse takeover by Spinnaker Opportunities.
He expressed concern about the lack of education among Israeli investors backing cannabis firms – something which could easily be replicated in London as a wave of companies arrive. Tamir said: ‘There are many companies that have no assets – the only asset they have is a licence to cultivate cannabis. They haven’t constructed greenhouses or production facilities yet and they’re getting very high values.
‘I don’t think investors will know how to tell between companies that have IP, patents and products because they’re all under the same title of cannabis companies.’
He added: ‘For sure, it’s hype. That’s not even a question.’
But while there will be some companies that fail, Tamir does not think it’s a bubble that will burst.
He said: ‘In stock markets, you always have this wave of up and down. And for sure, prices will not go up forever. Having said that, it’s an industry that has real value, that generates nice sales already, and it’s an industry that’s seeing regulation moving forward.’
He says clearer rules are needed to ensure the standard of produce is up to scratch. ‘We believe the regulation will be setting production standards and putting it under some kind of regulatory body.’
Most companies with cannabisbased treatments use extracts of CBD, but Kanabo also wants to use extracts of tetrahydrocannabinol or THC, the psychoactive substance which gets people high, to treat people with insomnia and sleep disorder, neuropathic pain, and post-traumatic stress disorder (PTSD) in treatments.
It has also developed a vaporiser medical device called VapePod that allows people to inhale cannabis oils and formulations.
One City stockbroker said the regulators were being careful about which cannabis companies to allow to list in fear of damaging the reputation of the whole sector.
‘If something lists on Aim that’s cannabis and it goes straight to a £1 billion market cap and then blows up, then the whole of London looks terrible,’ the broker warned.
Tory chief ’s cousin buys 4,000 acres of cannabis REVEALED: The MoS told last month of Chris Cleverly’s move