A number of European cannabis start-ups are planning to go public in New York to take advantage of a US proposal to reclassify marijuana as a less dangerous drug and decriminalization in Germany, despite depressed share prices among bigger groups in the sector.
Grow Group, a London-based medical cannabis distributor, is planning an initial public offering (IPO) on Nasdaq in the first quarter of 2025, targeting a valuation of more than £100 million. The company has raised over £12 million since its founding in 2017. Chief executive Benjamin Langley told the Financial Times that there had been a period of "six to nine months where money for cannabis was almost completely shut off" due to negative global sentiment and general risk aversion. However, he noted that the market is showing signs of improvement, with venture capital funds beginning to deploy funds in the space once again.
Langley stated that Grow would choose Nasdaq over the London Stock Exchange for an IPO, as he expects a higher valuation there. The company had been on the verge of signing an engagement letter with a bank for a listing last year but suspended the process due to lack of investor interest.
Lisbon-based Somai Pharmaceuticals, which is involved in the extraction, development, and distribution of medical cannabis products, is seeking a "reasonable" valuation of €250 million in a Nasdaq IPO, with potential secondary listings on the Toronto Stock Exchange or the LSE, according to chief executive Michael Sassano.
Wellford Medical, a London-based medical cannabis manufacturer and distributor operating in the UK and Germany, is another start-up considering Nasdaq. Co-founder Joshua Roberts believes that if the US reclassifies cannabis, coupled with the legislative change in Germany, it could be the perfect time for the company and investors to "catch that sentiment wave."
The US Drug Enforcement Administration (DEA) published a notice of proposed rulemaking in May, announcing its intention to remove cannabis from its list of the most dangerous drugs and recognize its medicinal use. Although marijuana is currently banned at the federal level, it is legal for recreational use in 24 states and for medical use in 38. Reclassification by the DEA could reduce taxes on state-legal cannabis businesses, where the effective tax rate is often 70 percent or more, and facilitate clinical research on the drug.
In Germany, the largest medical cannabis market in Europe, cannabis possession and small-scale home cultivation were decriminalized in April, and the drug has been removed from the national narcotics list. Medical cannabis has been permitted in the country since 2017.
The companies looking to IPO emphasize the importance of building investor confidence after previous boom and bust cycles in the industry. Sassano acknowledged the persistent taboo surrounding cannabis, which continues to pose challenges for the sector.
The Canadian cannabis market serves as a cautionary tale, with most marijuana stocks experiencing huge growth after the legalization of recreational use in 2018, only to be followed by a slump in share prices due to oversupply and cheaper drugs available on the black market. Canopy Growth, once Canada's most valuable marijuana company, and Tilray Brands of the US have each lost 98 percent of their market value from their respective peaks in 2019 and 2018. Shares in New York-based Curaleaf, the world's largest cannabis company, are down 75 percent from their peak in 2021.
However, Curaleaf founder and executive chair Boris Jordan believes the challenges faced by the industry are mainly due to strict regulation. He stated, "Governments need to decide if cannabis is going to be legal or is it illegal. And if it's going to be legal, then they have to come in and support and create a regulatory environment that allows these cannabis companies to flourish."
As European cannabis start-ups navigate the evolving regulatory landscape and seek to capitalize on the potential opportunities presented by the US market, their success will depend on their ability to build investor confidence, differentiate themselves from competitors, and adapt to the changing legal and social attitudes towards marijuana.
Grow Group, a London-based medical cannabis distributor, is planning an initial public offering (IPO) on Nasdaq in the first quarter of 2025, targeting a valuation of more than £100 million. The company has raised over £12 million since its founding in 2017. Chief executive Benjamin Langley told the Financial Times that there had been a period of "six to nine months where money for cannabis was almost completely shut off" due to negative global sentiment and general risk aversion. However, he noted that the market is showing signs of improvement, with venture capital funds beginning to deploy funds in the space once again.
Langley stated that Grow would choose Nasdaq over the London Stock Exchange for an IPO, as he expects a higher valuation there. The company had been on the verge of signing an engagement letter with a bank for a listing last year but suspended the process due to lack of investor interest.
Lisbon-based Somai Pharmaceuticals, which is involved in the extraction, development, and distribution of medical cannabis products, is seeking a "reasonable" valuation of €250 million in a Nasdaq IPO, with potential secondary listings on the Toronto Stock Exchange or the LSE, according to chief executive Michael Sassano.
Wellford Medical, a London-based medical cannabis manufacturer and distributor operating in the UK and Germany, is another start-up considering Nasdaq. Co-founder Joshua Roberts believes that if the US reclassifies cannabis, coupled with the legislative change in Germany, it could be the perfect time for the company and investors to "catch that sentiment wave."
The US Drug Enforcement Administration (DEA) published a notice of proposed rulemaking in May, announcing its intention to remove cannabis from its list of the most dangerous drugs and recognize its medicinal use. Although marijuana is currently banned at the federal level, it is legal for recreational use in 24 states and for medical use in 38. Reclassification by the DEA could reduce taxes on state-legal cannabis businesses, where the effective tax rate is often 70 percent or more, and facilitate clinical research on the drug.
In Germany, the largest medical cannabis market in Europe, cannabis possession and small-scale home cultivation were decriminalized in April, and the drug has been removed from the national narcotics list. Medical cannabis has been permitted in the country since 2017.
The companies looking to IPO emphasize the importance of building investor confidence after previous boom and bust cycles in the industry. Sassano acknowledged the persistent taboo surrounding cannabis, which continues to pose challenges for the sector.
The Canadian cannabis market serves as a cautionary tale, with most marijuana stocks experiencing huge growth after the legalization of recreational use in 2018, only to be followed by a slump in share prices due to oversupply and cheaper drugs available on the black market. Canopy Growth, once Canada's most valuable marijuana company, and Tilray Brands of the US have each lost 98 percent of their market value from their respective peaks in 2019 and 2018. Shares in New York-based Curaleaf, the world's largest cannabis company, are down 75 percent from their peak in 2021.
However, Curaleaf founder and executive chair Boris Jordan believes the challenges faced by the industry are mainly due to strict regulation. He stated, "Governments need to decide if cannabis is going to be legal or is it illegal. And if it's going to be legal, then they have to come in and support and create a regulatory environment that allows these cannabis companies to flourish."
As European cannabis start-ups navigate the evolving regulatory landscape and seek to capitalize on the potential opportunities presented by the US market, their success will depend on their ability to build investor confidence, differentiate themselves from competitors, and adapt to the changing legal and social attitudes towards marijuana.
