FOLLOWING a few weeks of relative positivity for many of the stocks listed on the London Stock Exchange (LSE), the market chaos caused by the UK Chancellor’s ‘mini budget’ has wiped £22,328,775 from the collective market value of LSE-listed cannabis stocks.
This erased Cellular Goods’ near 30% following the announcement of plans for a merger with Cannaray, marking the first of what is expected to be many consolidation deals to come in the UK cannabis sector.
While the consolidation deal has helped Cellular Goods continue its recovery, with the UK’s economic outlook souring by the second it is Cannaray who has undoubtedly come out on top, offering it a route to a public listing in a market where a CBD IPO would otherwise seem unthinkable.
Though extraneous market conditions have played a significant role in this week’s declines, some of the damage was self-inflicted.
This week MGC Pharmaceuticals, alongside two other Australian medical cannabis operators, were hit with fines collectively mounting to nearly A$1m.
The Australian Therapeutic Goods Administration (TGA) issued MGC Pharma with 23 infringement notices totalling A$306,960 (£182,250).
According to the TGA, all three firms ‘allegedly promoted the use of prescription-only medicinal cannabis products, including in certain cases their own named products’.
These adverts, which were featured across the companies’ websites and social media platforms, were believed to have contravened Australian therapeutic goods advertising laws.
The TGA also said that some of the alleged adverts included ‘unapproved references to the treatment of serious diseases’, including cancer and epilepsy, and implied that ‘particular medical cannabis products were recommended or approved by a Government authority’.
In response, MGC said it ‘cooperated fully with the TGA to remedy the issues’, seeing it remove all the flagged posts from social media channels and place its entire website into maintenance as it undergoes a full rebrand, set to go live again in November.
Alongside MGC, Little Green Pharma, an investee of SEED, was also issued with 28 infringement notices and fined A$372,960, while Cannatrek was fined A$300,000 for 22 alleged infringements.
It hasn’t just been LSE-listed companies impacted by the ongoing market turmoil. Synbiotic, which describes itself as the European hemp and cannabis industry’s ‘largest listed group of companies’, announced that its new ‘cash capital increase’ had come well below its initial targets this week.
Synbiotic says it has now completed the capital increase, originally announced on September 2, seeing it achieve gross issue proceeds of €1.7m after placing 142,261 new shares at a subscription price of €12 per new share.
This was considerably below its original plans to increase its share capital by 334,000, or 8%, for €15 per new share.
The company is understood to have adjusted its expectations ‘in view of the market situation’.
According to analyst firm AlsterResearch, the ‘outcome can be considered successful in the context of general uncertainty of the capital market’, adding that the ‘significantly increased risk factors on the overall market have made the capital measure significantly more difficult’.
Synbiotic says it plans to use the proceeds from the placement to ‘further expand its operating business’, signalling more acquisitions are on the horizon for the ‘buy and build’ company.
AlsterResearch concluded that given the upcoming launch of ‘a billion pound market’ in Germany, this is the correct course of action.
“Investors who back Synbiotic aiming for a successful legalisation of cannabis will be rewarded with a corresponding share price potential of more than 200%. We adjust the price target by the dilution effect of 3.4%, which brings us to a slightly lower target price of EUR 42.00. The rating remains BUY.”
The embattled CBD brand unveiled its full year results this morning, following the release of its ‘AGM statement’ to investors yesterday, in which it warned that it had ‘encountered significant difficulties during the (12 month) period to March 2022’.
This morning Chill Brands revealed that the £1m in revenues it reported during its interim results had actually declined in its full year to just £624,187.
This was due to a ‘related party agreement promissory note’ with Ox Distributing, which was based on product requirements for projected store counts, falling through.
Following ongoing ‘supply chain and logistics issues’ holding up shipments to stores across the US, Chill ‘determined that it was not financially equipped’ to fulfil these commitments, and thus the value of the note has been reduced.
During the year Chill reported a loss after taxation of £5.6m, largely in line with its losses a year earlier, with the group stating that its expenditure increased due to ‘very substantial legal costs’ relating to the ‘legality and marketing of CBD products’ alongside costs relating to its listing on the LSE.
Investors have once again raised concerns about how long the company can continue to operate at its current run rate, with Chill reporting £420k in cash ‘at the year end’.