CELADON Pharmaceuticals successfully listed on the Alternative Investments Market (AIM) this week, making it the first British company to join in 21 years.
On Monday March 28 2022 Summerway Capital, which rebranded as Celadon Pharmaceuticals the following day, was admitted to AIM following an £80m reverse-takeover deal with Vertigrow Technology Ltd.
Its admission represents a ‘huge milestone for Celadon’, according to the new entity’s CEO James Short, but also for the UK cannabis industry at large.
Not only is it the second British cannabis company to go public in as many weeks, but Celadon is the second homegrown cannabis company ever to list on AIM, following GW Pharmaceuticals in 2001.
The newly formed entity now has 61.7m ordinary shares in issue, giving it a market capitalisation at admission of £97.4 million at a share price of 158p.
Since listing the company’s share price has dropped by just over nearly 7% to 145p, bringing its market cap to around £90m.
The newly formed entity now owns a 100,000sq ft facility in the Midlands which has a licence to grow high-THC cannabis for the purpose of producing test batches until January 2023, with a UK-GMP licence and MHRA authorisation already in the works.
It also owns a majority stake in LVL Health, a chronic pain clinic, alongside a minority stake in cannabinoid-based biopharmaceutical company Kingdom Therapeutics.
This provides Celadon with a direct inroad into its target chronic pain market, which UK Government figures suggest could consist of 3 million patients, 50,000 of which its facility could service when it’s licenced and running at full capacity.
Alongside organic growth, DLA Piper, who helped advise Celadon’s official broker and Nominated adviser Canaccord Genuity on the admission, says the reverse take over deal and recent £8.5m raise provides Celadon with a compelling foundation from which complementary M&A opportunities could be executed.
Why Have There Not Been More AIM Listings?
Various international cannabis companies, including Canada’s Sativa Group and SEED Innovations, have listed on the AIM market in the past, but even the LSE’s change in policy and flurry of IPO’s last year have failed to entice many British firms onto the market.
This is despite the fact it provides a perfect middle ground for cannabis businesses, offering more liquidity than the Aquis Stock Exchange, and supposedly easier entry than the LSE’s main markets.
DLA Piper’s Senior Associate Dylan Kennett told BusinessCann: “AIM is the natural place for a lot of cannabis companies, especially in the UK, as they grow.
“It’s a perfect growth market. And it makes a lot of sense for them to be there.”
By design AIM is known for being less stringently regulated than higher-capital markets, and is largely regulated by ‘nominee advisors’, or ‘nomads’.
These nominated advisors are approved by the LSE, and are essentially responsible for advising, guiding and ensuring a company is compliant during its admission and beyond.
This largely self-regulatory framework has reportedly had the opposite effect for cannabis companies, meaning the market is even more stringent and keen to ensure things are done perfectly to avoid further scrutiny or controversy.
Aside from this, Mr Kennett explained that a lack of institutional capital in the industry means many companies hoping to list simply aren’t yet ready.
This lack of access to capital means growth companies who would usually target private financings, like Series A or B funding rounds, are forced to target a market listing instead.
Many of these are at ‘far earlier stages than we would expect a company to go public here in the UK’.
“That is a function of there being a lack of institutional private capital. From say, high net-worth individuals, angels and certain family offices, there’s very little funding in the middle stages.”
While he added that this is slowly coming online, citing Leafy Tunnel’s recent fund formation, there has been ‘a dearth of venture and growth capital that helps grow and develop the company and its business model to a stage and level of sophistication where we would then naturally expect a public listing’.