HELLENIC Dynamics is aiming to become the first medical cannabis cultivator to list on the London Stock Exchange.
Early last month UK SPAC Plc, an AIM-listed cash shell, announced it had acquired 100% of Hellenic and was aiming for listing on Standard segment of the LSE’s main market.
The deal is pitched at £45.2m, with some 9.5bn new shares to be issued at a price of 0.472p per share.
Hellenic’s Vice President Davinder Rai is confident that it will become a listed company, despite the UK’s complex legal framework surrounding such investments.
Mr Rai told BusinessCann: “We expect to join the LSE before the end of October at the latest.”
UK SPAC whose investors include Raglan Capital and Hargreaves Lansdown Nominees, has submitted a first draft of the prospectus to the FCA and made an application in respect of a Standard Listing.
Satisfying The Regulators
Late last year the Financial Conduct Authority said it was changing the rules to allow cannabis companies to list on the LSE.
A handful of cannabis and CBD companies have so far joined Europe’s largest stock exchange, including Kanabo Group, MGC Pharmaceuticals, Cellular Goods and Oxford Cannabinoid Technologies.
Under the FCA rules, companies that grow and sell recreational cannabis – even in countries where it is legal, such as Canada – cannot list in London because income from such activity would be an offence in the UK under the Proceeds of Crime Act 2002.
However, both UK and overseas medical cannabis firms can float in London – as long as they can satisfy the regulator they do not breach its rules.
This means that companies with overseas undertakings need to assure the FCA that their activities would be legal if carried out in the UK. The FCA says it also needs to understand the legal basis of a company’s overseas activities, such as local licensing.
Greece legalised cannabis for medical use in 2017 – a year before the UK – and has also introduced provisions for the cultivation and export, of cannabis with more than 0.2% THC.
FCA Is ‘Rightly Cautious’
Despite the complexities surrounding a London listing, Mr Rai remains confident. He said: “We have signed the SPA (Sale and Purchase Agreement), and the prospectus is currently with the FCA.
“This is a difficult one. Yes, there are companies listed on the main market, such as Kanabo and Cellular, but as the first foray into real medical cannabis at the cultivation level, especially with the fact that we are THC dominant, it is a new one for the FCA.
“This could go quickly and they [the FCA] could consider us the same as the others, or they could be slightly more cautious due to the nature of us being the first cultivator. It’s a difficult one to gauge, but however long the IPO (Initial Public Offering) takes, it is not stopping us continuing doing what we are doing in Greece.”
Mr Rai added the SPAC deal had been in progress for some months. “The vast majority of that work has been on defining legal opinions. The FCA is rightly cautious that anything we do in Greece or in Germany, has got to be legal in the UK.
“The vast majority of the time taken has been to compile the correct legal opinions to provide some comfort to the FCA that we are not doing anything that is not legal here in the UK.
“We keep very good advisors. We have Peter Homberg (of the international law firm Dentons, where he is head of the European Cannabis Sector group), and Professor Mike Barnes (a UK-based consultant neurologist and medical cannabis expert) on board, which takes care of a lot of the patient requirements and legalities, and we have got at least two other law firms providing oversight.”
Hellenic is headquartered in London but operates a 200,000m² site in an ex-UN facility in Northern Greece from where it plans to grow, manufacture, process and sell THC-dominant dried medical cannabis flowers and extracted oil for export
It was established in 2019 with backing from friends and family. Unlike other medical cannabis firms, Mr Rai said they took a backwards approach. “We didn’t just say right, we’re setting up a facility to grow cannabis. We went to the patients, to the doctors and the distributors in Germany and the UK, and found out how best to address the market opportunity.
“There are a lot of countries in Europe that allow the cultivation of THC, but very few that allow it for export, which is how we ended up in Greece.
“Greece at that time was pursuing cultivation licenses, as were Portugal, Malta and the UK. However, we chose Greece because there was a facility available, competitively-priced electricity, and the option to use solar panels or some other renewable energy that we could feed back into the grid to bring down the cost and our carbon footprint.
Mr Rai said Greece is also more advanced than the UK when it comes to dealing with medical cannabis firms. “I think selfishly that is not driven by the need for medical cannabis domestically but by the need for foreign investment, education and jobs.
“It is an emerging sector and I think the Greek government has done a great job in defining very plainly what you can and can’t do. In essence, it is the same as here in the UK, but they have made the process more transparent.
“The only small thing that has changed is that we were not planning on producing a secondary extracted product. We were solely looking to be a market leader in THC dominant dried flowers.
“But on May 24 the Greek government passed an amendment to its cannabis law where it requires licensed cultivators to also produce a secondary product, which in our case is going to be an ingestible one for the Greek domestic market.
“That has accelerated our plans to get into the extract market.”
Hellenic has a total license to cultivate 40,000m². It received its installation licence last year and its security certificate in late 2020. The firm is now at the production stage and will be seeking Greek EOF – the National Organisation of Medicines – approval.
GACP and EU-GMP approval has been pencilled in for Q1 next year. “We have been working with leading Greek and German experts from day one so we are checking ourselves at every move.
“Our aim is to get our first shipment out to buyers by the very latest at the end of Q1 as a GACP approved product. EU-GMP will check us post-harvest in Q1.”
Mr Rai said a measured approach had been taken to getting the Greek facility up and running.
“I meet people who say they have got 10,000m and are growing 54,000 tonnes of cannabis a year and my jaw drops. But what are you going to do with all that cannabis? That is three times the entire European market share at the moment.
“We are going slowly. We have a very unique opportunity in Greece where we have the ability to actually register strains of cannabis for IP protection, and so the idea is that we are taking a staged approach in terms of the facility.
“We are starting to register our strains and we have our first commercial sales in the diary for Q1 of next year.
“It is about seeing what the best product is we can get out to patients. We tick that box and the rest will come.”
In May it agreed a Memorandum of Understanding which envisages UK cannabis firm Kanabo buying up to 1,000 kg per year of its EU-GMP certified cannabis flowers with pre-defined THC or CBD contents.
Special Purpose Acquisition Companies
Special Purpose Acquisition Companies – also known as blank cheque enterprises – use capital raised through floating on an exchange to acquire a business. For private companies they offer a relatively low cost and speedy way of listing.
SPAC IPOs and listings have been particularly popular in the US and last year raised the equivalent of £63.5bn.
The FCA announced proposed changes to the rules surrounding SPACs on August 10 this year to offer such entities greater flexibility and to better protect investors, in a bid to help breathe new life into the London market, which has been left playing catch-up.
Last year 248 SPACs were listed in the US compared to four in the UK market, raising a total of just £30m.
UK SPAC Plc was an AIM-listed cash shell, but in line with regulations trading in the company’s ordinary shares were suspended when the reverse takeover of Hellenic Dynamics was announced.
The acquisition is conditional on UK SPAC Plc having a minimum cash balance of £3.9m at completion, which will be satisfied by the issuing of new shares. The cash will in part be used to expand Hellenic’s Greek site.
Mr Rai described a SPAC as “an efficient way of securing a listing”.
“It is a faster route. It provides all the checks and balances needed to be a listed company, and they also have the required cash within them,” he explained.