The first cannabis business to IPO on the London Stock Exchange has seen its shares double on debut, underlining the appetite among UK investors to gain exposure to the fast-growing sector.
Shares in Kanabo (KNB.L) hit just over 20p shortly after the open on Tuesday, as the stock officially began trading in London. The stock was still up 60% after around 20 minutes of trade, changing hands at 16.30p.
Kanabo makes vaporised marijuana pods and inhalers for medicinal use. The Israeli company also makes CBD products for the "wellness" market.
Kanabo is the first cannabis company to hold an initial public offering on the London Stock Exchange after the UK's financial watchdog last year cleared the way for legal weed businesses to join the market. However, Kanabo is the second cannabis stock to be traded in London after Australia's MGC Pharmaceuticals dual-listed its shares on the market last week.
"We are proud and happy to be listed on London Stock Exchange," chief executive Avihu Tamir said in a statement.
"We share the enthusiasm shown by the investment community in the UK for this important day. The reaction we have seen since we published our prospectus two weeks ago has been overwhelming."
Kanabo's raised £6m ($8.3m) in the IPO but the fundraising was 300% oversubscribed due to strong demand among investors, Tamir told Yahoo Finance UK in a recent interview.
Cannabis has become one of the hottest investment markets in the world after weed was legalised for recreational use in parts of North America. This trend, combined with growing mainstream acceptance of medical marijuana, has led to a rush to buy pot stocks in the US.
"With the support of the FCA and London Stock Exchange, the medical cannabis industry is set to take off in the UK and in Europe, similar to what's happened in North America in recent times," Tamir said in a statement. "This is just the beginning."
According to a new report, entitled European Cannabis 2020, by international cannabis market research firm Brightfield Group, expectations to allow for domestic cultivation and general practitioners prescribing in the coming years will result in a 2020-2025 compound annual growth rate (CAGR) of 98%.
In 2020, Europe’s cannabis market is projected to reach $359m (£269m) in 2020, a rise of 25% from 2019, and will grow to over $3.1bn by 2025, with a 2020-2025 CAGR of 52%
Brightfield Group said that while it had initially projected the cannabis market in Europe taking a hit from the pandemic, due to decreasing patient registrations and supply chain disruptions, the market grew 28% during the year.
“The last few months have seen an acceleration in the pace of change in the healthcare industry. As healthcare systems are rebuilt to be more digitally-enabled and personalised, we will reassess the role that cannabis can play in improving a patient's quality of life,” said Gavin Sathianathan, CEO of healthcare tech app Alta-Flora in a statement to Yahoo Finance UK.
“Europe's healthcare systems will be under huge pressure to reduce costs in the next decade, and medical cannabis will eventually play a pivotal role in improving quality of life for millions of people.”
Brightfield said that the market managed to grow during COVID-19 because tele-health became more common and “encouraged the medical cannabis enrollment of trepidatious new patients, and in addition, physicians and pharmacists were some of the only entities to keep the doors open during 2020, thereby leaving current and potential patients with registration and renewal options.”
“In addition, supply chains have gone by-and-large uninterrupted, keeping the market well-stocked,” it added.
In Europe, Germany currently has the largest medical cannabis market with projected sales of $267m in 2020 and is expected to make up to a $2.1bn market by 2025.
“The potential of Europe's cannabis market cannot be overstated but it operates quite differently to the more mature markets in North America,” said Nick Pateras, managing director, Materia Ventures — a company that focuses on manufacturing, distribution, and customer acquisition in the global cannabis market— in a statement to Yahoo Finance UK.
“It is therefore imperative that investors and entrepreneurs take the time to study the complex regulatory frameworks that govern cannabis in Europe, as well as the critical success factors that will drive the continent's future growth.”
As Brightfield Group pointed out, Europe’s medical cannabis market “is still rather small” when compared with the likes of the US where total combined legal sales of medical and adult-use cannabis in the US are projected to reach $35bn by 2025.
However, “it is poised to grow rapidly, especially once more supportive continent-level (or global) regulations are in place. Once established, they will pave the way for a stable and scalable medical cannabis market across the region, rather than the patchwork that is in place today,” said Brightfield.
Michael Sassano, CEO, Somai Pharma — a company focused on the research, development and distribution of cannabinoid-containing drug formulations in EU — said in a statement to Yahoo Finance UK:
“Europe will attempt to catch up with North America as countries like Denmark, Switzerland and Luxembourg go for adult-use.
“However, the investment appeal of worldwide pharmaceutical acceptance of products, as well as the vast associated distribution networks, will begin to dwarf localised sales networks like dispensaries and social clubs.
“The fact is, most cannabis consumers are trying to fix either pain or sleep or other ailments and want standardised guidance rather than trial and error. And as new demographics open, like the elderly and professionals, there will be more demand for products made from clearly registered sources.”