While Frankfurt is the current market of choice for overseas companies, the additional capital available in London will see it become Europe’s financial cannabis hub, say experts.
Jonathan Roy, a Director at the Cannabis Investor Forum, said the U.K. investment opportunities are currently limited to a few companies as others ‘play a waiting game’.
Speaking at the recent Hemp & CBD Expo in Birmingham, England, Mr Roy said its research indicates there are companies looking to list on the London financial exchanges, but want others to take the plunge first.
10 to 15 Flotations Imminent
He said: “There are cannabis companies looking to float on the London markets, some just do not want to be the first, as the costs will be high. However, once the market starts to move we expect to see 10 to 15 companies listing, within two years, and the creation of a recognized cannabis sector on the market.
“While we are currently seeing North American companies attracted to Frankfurt it does not match the financial liquidity available in London, and it will develop as the primary European market.”
No Major Brands – Just Yet
While North American companies are attracting the interest of leading global brands – Hexo and Molson Coors, Canopy and Constellation – these type of deals will not be evident in London for some time, said Mr Roy.
“We are still at a very, very, early stage, for companies in the U.K. and it may be a further three years before they become the targets for the major brands.”
One of the issues facing U.K. cannabis businesses is the Proceeds of Crime Act which deters investment, with banks being wary of any potential legal pitfalls, and reticent to invest.
Concern And Confusion
Nick Tulloch, CEO of Zoetic, formerly Highlands Natural Resources, heads one of the few U.K. companies currently listed on the London Markets. He says these concerns and ‘confusion’ around regulations, are making conservative, institutional investors wary of the sector
“They don’t want any scandals, so at the moment the money is coming from smaller retail investors, some smaller, fleet-footed institutions and high net-worth families. I can speak to three different lawyers and get three different opinions. Harmonisation, and a clear regulatory structure would be very welcome, and would and create certainty to deal with some of the issues with the banks.”
He said the influence of social media is key in the cannabis space saying investors ask first about packaging and social media presence, before moving on to the quality of the product.
Institutional Investors Play Waiting Game
Geoff Miller, of specialist cannabis financial advisors Cannafi, said most family, high net-worth offices now have an investment in the sector. “Lots of institutional investors cannot see anything in there, large enough to get involved, but they are keeping an eye, and will eventually come in.”
The inability of the banks to embrace the cannabis industry over regulatory and legal concerns means many cannabis businesses are forced to use virtual providers at costly premium, he explained. A number of cannabis company’s currently trade on smaller markets in London, such as the NEX Exchange, including The Sativa Group and Ananda Developments.
The London Stock Exchange is expected to get its first listing with Israeli firm Kanabo Research and Australian firm MGC Pharmaceuticals company both looking to float in the coming months.