AKANDA Corp has become the latest British cannabis company to go public after it launched on the NASDAQ Stock Exchange this week, seeing its stock soar some 350% above its listing price.
The young ‘seed to patient’ medical cannabis operator, which had originally planned to list on February 25 2022, issued 4m common shares at a price of $4 to the public under the ticker ‘AKAN’ on Tuesday March 15 2022, with its offering due to close on March 17.
Tuesday’s listing saw Akanda’s stock open at $30, before stabilising later in the day at around $17, seeing the company’s market cap more than quadruple the $116m initially predicted.
As anticipated, this strong market debut has seen Akanda raise $16m in capital before expenses.
Its CEO Tej Virk tells BusinessCann that the company will be ‘putting the capital to work’, building out infrastructure at its growing facility in Southern Africa, which has access to nearly 500 acres of land, while leaving ‘a little bit of room for M&A’.
BusinessCann reported in early February that Akanda had filed with the SEC to launch a public listing on the NASDAQ, with its original proposed price range targeting a share price of between $4 and $6, with an over-allotment option including 600,000 extra shares.
A week before it was due to list, Akanda revised its share price to the low end of its initial filing at $4, reducing the proceeds it planned to raise by 20%.
The following week, as war broke out in Ukraine and cannabis stocks across the globe saw dramatic declines, Akanda postponed its original listing date.
Regarding the delay, Mr Virk said: “The reason why now is the right time to list is because we need to raise vital growth capital to execute our business plan as medical cannabis product uptake in end markets is increasing. It’s definitely worth noting that as a society we have been crisis jumping, from pandemic to conflict, which is taking a toll on people’s mental health and medical cannabis is known to treat PTSD – so now is definitely the right time for Akanda.”
While the global financial impacts of the war in Ukraine are only just starting to be fully understood, Akanda’s move to list on the NASDAQ rather than a European alternative like the London or Frankfurt Stock Exchanges, is likely to have helped limit its exposure.
Since the war began the S&P 500, which tracks the performance of 500 large companies listed on stock exchanges in the United States, has dropped by just over 1%, while the FTSE and DAX indexes have suffered much greater volatility.
According to Mr Virk, who was a banker for around 15 years and says he has ‘led over 100 IPOs and helped raise billions of dollars’ during his career, the NASDAQ represented the best opportunity for Akanda to raise capital, despite its focus on EU markets.
“I’ve done some legwork on different exchanges and I’ve definitely weighed these possibilities, LSE, Australia and beyond.
“And it’s really a function of flexibility and access to capital. I think there are more investors and better liquidity and better flexibility around a NASDAQ listing. It just wins in all categories… you really are going to the champions league of exchanges.”
Akanda, which counts Bophelo Bioscience and CanMart as wholly-owned subsidiaries, said during its SEC filing that it required the additional capital from its listing to continue its current plan of operations.
A large part of this strategy involves building out Bophelo’s 200-hectare cultivation facility in the Southern African country of Lesotho, one of the first countries to legalise medical cannabis cultivation on the continent.
This will involve ‘suring up’ its greenhouse infrastructure, improving yields and improving its margins through a modular growth approach.
The facility reportedly represents a ‘long term strategic asset’ for Akanda due to its ability to grow ‘high quality and affordable cannabis.
Currently the facility has only achieved GACP qualification, the minimum standard to enter the global supply chain, but while the company is reportedly evaluating whether to target full EU GMP certification, it doesn’t see it as essential to bringing products to market.
This is due to its partnerships with a number of leading operators including Cantourage, giving Akanda a supply route into Germany.
Its distribution arm CanMart already imports and distributes medical cannabis to pharmacies across the UK, and Akanda is reportedly working on transforming this into an ‘international marketplace’.
The marketplace, which is expected to sell a range of dry flower and extract products, represents intrinsically higher margins for Akanda and will therefore be a key focus for its future goals.