European Cannabis Stocks 2022
Cannabis companies across Europe have had an extremely difficult year on the markets, with more than £1bn wiped off their collective market value.
While 2022 proved to be a difficult year for stock markets across the globe, cannabis stocks have performed well below the market average.
According to Prohibition Partners’ recently published Global Cannabis Report: 3rd Edition, the residual fallout from the pandemic and ongoing war in Ukraine have dragged global stock market prices down 25% this year.
Meanwhile, cannabis stocks have been nearly four times as volatile, experiencing an overall decline of around 60%.
Just two companies tracked by BusinessCann managed to finish the year with a stock price higher than they started, pharmaceutical players Jazz Pharmaceuticals and Futura Medical.
Of the 30 stocks in our European cannabis index, 27 saw their stock price drop by double digits, including 21 that saw their value more than halve, and over a third that saw their value drop by 75% or more.
On the London Stock Exchange alone, BusinessCann estimates that nearly a quarter of a billion pounds have been wiped off the value of listed cannabis companies.
Despite the poor performance, Q4 has seen an string of cannabis companies break through onto the public markets and secure new funding.
In early October Berlin-based cannabis operator Sanity Group closed Europe’s largest ever cannabis investment round worth €37.6m, bringing its total funding to date to over €100m.
In November Danish medical cannabis firm Stenocare announced that it has secured further funding via a convertible loan facility giving it enough runway to reach break even.
Weeks later, Cantourage became the third and largest major European medical cannabis operator to publicly list its shares this year, offering ‘approximately 15%’ of its total bearer shares available in free float on the open market of the Frankfurt Stock Exchange (FSE), valuing the company at just over €80m.
Another German operator, Cannovum, announced plans in early December to move its shares onto the ‘Primärmarkt’ (Primary Market) of the Düsseldorf Stock Exchange, before launching a secondary listing on the larger FSE and Xetra exchange ‘by the end of the year’, which was completed this week.
This was closely followed by Hellenic Dynamics, which listed on the LSE last Monday after extended negotiations with the UK’s financial regulator, valuing the company at £31.2m.
Similar to the current environment across the Atlantic, the disappointing performance of cannabis stocks throughout the year doesn’t necessarily reflect the financial performance or the potential size of the market.
This Week’s Stocks
This state of affairs was summarised in investment firm SEED Innovation’s interim results, in which it announced an 18% drop in its Net Asset Value (NAV).
SEED, which holds a stake in six cannabis companies worldwide, said that during the six months to September 30, 2022, its NAV fell from £20.4m to £16.7m, equal to net assets of 7.84p per ordinary share.
In a statement to investors, the company’s chairman Ian Burns said that 2022 has been ‘one of the most challenging periods for a considerable time’ due to global economic headwinds, resulting in poor investor activity across all sectors and ‘a very tough twelve months’ for venture capital investors.
Mr Burns added that he did ‘not believe that the current share price reflects the true value of the company’, and that he continued ‘to be a firm believer in investing in the health and wellness space, including medical cannabis and CBD’ and remained ‘optimistic for the new year’.
Furthermore, he said that this macroeconomic back drop provided SEED with a ‘great opportunity’ to take advantage of ‘more realistic venture valuations’.
Yooma Wellness, which SEED has previously stated had a ‘major impact’ on its NAV, ‘continued to see a disappointing’ performance over the period, but SEED said it remained ‘quietly optimistic about its recently reported acquisitions’.
Elsewhere Little Green Pharma ‘made strides in advancing its global expansion strategy’, including numerous partnerships with Cannamedical, Demecan and Ilios Sante over the period, while achieving record quarterly revenues of AU$4.9 million in the three months to September 30.
According to SEED its ‘only frustration’ is that this progress has not been reflected in its share price performance.
Post period, on December 7, SEED announced plans for a potential ‘disposal’ of its legacy holding in Leap Gaming, which will reportedly generate nearly €6m in cash over two years.
“We had been pursuing a liquidity event for Leap over the last 3 years, but the worsening equity market conditions and macroeconomic factors made it clear that this was not going to materialise in any sensible time frame.”
UK CBD consumer goods company Love Hemp has announced another ‘significant change in board members’, further delays to its relisting on Aquis, and a new £1.5m loan to see it through ‘working capital difficulties’.
In an update to investors published on December 14, Love Hemp revealed that despite a 42% increase in year-on-year sales over the three months to September 30, 2022, a ‘challenging operating environment’ had impacted its sales during the vital holiday quarter and would likely lead to ‘slower growth’.
Aside from the cost of living crisis, Love Hemp said that its ‘invoice discount lender’ Windfall Logistics, which provides cash to cover unpaid invoices, said it would stop servicing the company.
This was reportedly due to Love Hemp’s ‘largest retail customer’ issuing unexpected invoices for past product promotions including an overdue loan of £450,000.
Love Hemp has therefore secured a loan from ‘a group of strategic investors’, understood to include existing shareholders, of £1.5m due to incur a total aggregate transaction cost of £310,000.
A reported £700,000 of this loan will be used to cover debts to Windfall Logistics and release the security held by them over Love Hemp assets, up to £150,000 of which ‘may be returned’ to Love Hemp in the coming months as outstanding invoices are collected.
Alongside this new loan facility, Love Hemp is set to see three senior board members, including its interim CFO Anthony Dyer, non-executive chairman Graham Mullis and former executive chairman Andrew Male resign from the company ‘with immediate effect’.
This marks the latest major change in the company’s senior team, after welcoming Robert Smyth in September as its new CFO, before announcing his immediate resignation a week later ‘by mutual consent’, and placing Mr Dyer in his place as interim CFO.
Furthermore, Love Hemp says it will not be ‘able to complete the audit of is financial statements’ for 2021/2022 by the end of the year, and will also be delaying its AGM.
In light of this delay the company, which has had its shares suspended on the Aquis Stock Exchange since May, says it will not apply to lift the suspension until after the financial statements had been filed.