Buchanan sponsoring Cannabis Invest UK

Buchanan had the pleasure of sponsoring Cannabis Invest UK, an exclusive event bringing together early-stage healthcare, health & wellness and biotechnology companies in the cannabinoid sector with institutional investors, private wealth managers and high-net-worth investors, as well as other industry stakeholders. As one of the first in-person cannabis events since COVID-19, there was a palpable excitement and eagerness to connect.

Ariadna Peretz (Director at Buchanan) moderated a panel on navigating regulation in the UK cannabis sector. She was joined by Nick Davis (CEO at Memery Crystal), Tristan Gervais (Head of Cannabis Advisory at Chrystal Capital) and Robert Jappie (Partner at INCE) and a full house of in-person and online viewers.

Regulation has been fluid since the FCA gave medical cannabis companies the green light in 2019 to list on the Main Market of the London Stock Exchange. And while guidance may have not been as quick-paced as previously anticipated and there have been some setbacks (such as the drawn out FSA validation process for CBD companies), the panel agreed there were plenty of medical cannabis and CBD-related transactions in 2021 and 2022 should be an exciting year for the equity capital markets.

One of the questions the panellists tackled was whether the listing and disclosure requirements are worth the effort because the option to stay private is also available. The consensus was, as medical cannabis is a capital-intensive industry, the equity capital markets is the right place to be because of the deep pools of capital available. Additionally, companies that have listed are now trading at significant multiples against revenues.

That said, a UK-focused company should look to list in the UK, not in North America. For the most part, the North American market is focused on the lucrative recreational market. In fact, there are some North American companies with European assets in their portfolio that receive nil value. The expectation is for these companies to spin out their European assets, raise money in Europe and create extra value for their shareholders through two geographically distinct companies.

The topic of banking was also discussed at length and rightly so – if companies can’t process their payments or secure debt financing because financial institutions don’t want to get involved due to fear of crossing the regulators, the sector as a whole will be stuck. The panellists spoke about the potential impact of the Secure and Fair Enforcement (SAFE) Banking Act. If the Act is passed in the US, it will remove conflicts between state law and federal prohibition and give banks and financial institutions peace of mind that they can now get involved in the industry without fear of breaking federal laws. The SAFE Act’s passing would ideally impact UK regulators’ guidance to local banks and financial institutions.

Overall the panel was both lively and informative. We look forward to seeing where the companies and overall sector are at come September 2022 – hopefully we will have seen a strong wave of high-quality, liquid and well-financed medical cannabis and CBD companies listed on the various exchanges. 

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