UK Financial Regulator Outlines Route To Market For Cannabis Firms

EXPECT to see a significant uptick in market flotations of domestic and global medical cannabis companies after UK financial regulators outlined official listing guidelines for the first time.

As things stand, the UK has only one London Stock Exchange-listed cannabis company with Zoetic International, which sprung out of a natural resources business and has, until recently, been focused mainly on the US.

There are a small number of other cannabis companies listed on the secondary markets such as Ananda DevelopmentsWorld High Life and Freyherr International, all on the Aquis Exchange.

For some time there has been speculation that many other business have been looking to pursue the IPO route but concerns over regulations brought in after the Twin Tower terror attacks have deterred entry.

Access To Capital Essential For UK Firms

However, the new guidelines – which have put out for consultation by the Financial Conduct Authority (FCA) – set out for the first time a clear path to market for medical cannabis and CBD companies.

Hanway co-founder Alastair Moore.

Alastair Moore, Co-Founder and Director of Hanway Associates a London-based advisory business with a strong focus on supporting early stage and maturing cannabis businesses, welcomed the development.

He said: “It’s good to see the FCA looking at the issue. Access to the capital markets is essential for British cannabis businesses looking to compete on the global stage. 

“Cannabis is an increasingly global sector and we want to attract that business to the UK, so hopefully the guidance consultation will address this.”

Stephen Murphy, Co-Founder & Managing Director, Prohibition Partners, a London-based cannabis market intelligent business with a global focus is also bullish.

He said: “This announcement is an extremely considered approach to getting cannabis companies listed in London. 

“For the past 24 months, countless companies have pinned hopes of accessing this influential market, but today marks a major turning point with the FCA publicly engaging with the industry, and indicating willingness. 

“While the guidance may not be welcome news to all, this approach is very positive for UK-based companies focused solely on the medical market.”

Could Australian Firm Be First Mover?

Two of the first companies expected to take advantage of this are Australian firm MGC Pharmaceuticals and London CBD firm Cannaray.

Roby Zomer, MGC’s chief executive told the FT: “We’ve been trying to list in London, for more than a year and a half. 

“It was frustrating because no one wanted to take a position on this and put all companies that had something to do with cannabis in one basket,” he said, adding that he welcomed the ‘FCA finally taking a position on the matter’.

Last year Cannaray, a CBD and medical cannabis firm successfully closed a £7.8m Series A Funding round telling Health Europa it is looking to raise more than £30m in the hope of floating with a  £100m value.

The new guidance effectively rules out any market entry for overseas recreational cannabis firms.

It says that UK companies operating in the medical cannabis and cannabis oil (CBD) markets will be free to float, providing they comply with all domestic regulations.

It says it is willing to accept overseas medical cannabis companies as long as they ‘are satisfied’ the Proceeds of Crime Act (PoCA) does not apply.

It also goes on to say the UK companies with overseas divisions will need to satisfy the LSE that the ‘PoCA does not apply and they otherwise satisfy the criteria for listing’.

Anti-Terror Legislation Has Stymied Market

For many years industry advocates say the growth of the UK cannabis industry has being hamstrung by legislation initially drafted in response to the 9/11 attacks.

The 2002 PoCA defines ‘criminal property’ as that which is obtained from ‘criminal conduct’ – under UK law – even if that criminal conduct is in accordance with the local laws and regulations.

BNN Bloomberg reported a top London lawyer last year as saying that two years ago ‘there was a real surge of excitement. It felt like there were overflowing bank balances just waiting to launch’ in the UK cannabis markets.

But the Proceeds of Crime Act 2002 has had a ‘chilling effect’, he said.

Cannabis lawyer Nick Davis, CEO of London law firm Memery Crystal, has been dealing with numerous clients looking to the London markets in recent years.

He said: “This is great and overdue news for the medicinal cannabis sector in the UK, both for medicinal cannabis companies themselves, but also for patients, who have yet to receive easy access to the products they need.

“Our firm, and a number of our clients, have worked hard over the past few years to have medical cannabis companies admitted to the London markets. “With greater clarity from the FCA we hope investors will also support companies coming to market to drive the sector forward.”

UK firm GW Pharmaceuticals is one of the world’s largest cannabis companies but it transferred its market listing to the Nasdaq in 2017.

There had been some speculation the medical cannabis firm Emmac would list on the UK markets but it has also chosen to list on the Nasdaq.

There are a number of UK firms listed on the London markets with an interest in cannabis, but not their primary activity these include and Futura Medical, Integumen, AfriAg and Associated British Foods which grows the cannabis for GW.

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