Tuesday, April 20, 2021

Kanabo Knocks It Out of The Park With London IPO


Vape aficionados in the United States and Canada may not yet have heard of Kanabo, but after their impressive debut last week in London, that is likely to change. 

The Israeli firm has worked hard in the last several years to position itself against its main competitor, German firm Storz and Bickel, known not only for the eponymous “Volcano” but also for their medically certified vaporizer offerings. 

Now, thanks to the explosive performance in London (Kanabo’s stock price increased exponentially in the second week of February and is still hovering over 28 dollars a share) the two firms are set up to go head-to-head for a huge segment of the developing medical market. Namely medical users who use either flos (flower) or extracts must use a medically certified vaporizer to ingest it. By definition, that means Europe-based consumers and companies.

But what exactly is all the fuss about “medically certified” cannabis firms on stock exchanges about to begin with?  Not to mention the focus on “certified” vapes 

This discussion is almost unknown in North America.

The European Financial Sector Wants to Invest in The Medical Cannabis Business

Much of the history of the discussion about who could list on a stock exchange as a cannabis firm has been parsed over the last few years in the pages of the cannabis specialty press. Namely, the right to list at all, anywhere—which was all the rage as Canada and the U.S. began to experiment with cannabis reform. However, in Europe so far, this has been far more of a dicey proposition. Indeed, all of the large public cannabis firms circling the German cannabis cultivation bid avidly sought to launch an IPO from Frankfurt. 

So far, however, the Deutsche Börse, in particular, has refused to bite—and for any cannabis firm, although medically focussed firms are now allowed to list and be traded in Germany. Indeed, there has been only one blanket delisting of the entire sector—and that only for a brief period of time as Luxembourg also changed its medical cannabis laws to allow German bought stocks to “clear” in the trading exchange based here. 

Regardless, the ongoing lack of clarity about what was a “legitimate” medical cannabis company, and which one was not has so far rested, in Europe at least, upon GMP or pharmaceutical grade certification for all its moving pieces. This means the cannabis that is grown for the market, as well as all processing of the same downstream before it reaches the consumer. It also means that a much higher standard must be applied to the equipment used in consuming it.

In this space, in other words, cannabis vapes are still not “legit” until they have a medical certification—sanctioned literally as medical equipment.

Like PPE, not just anyone can provide this specialized manufacturing process.

The critical distinction, however, between “medically certified” and others, is one of the best markers of being able to raise money on the LSE for cannabis firms.

Kanabo ticks all the boxes.

And as a result, in becoming the first “legit” cannabis focussed company to list on the exchange after the British Financial Authority changed the rules last year, its initial public offering was instantly popular. 

The investment climate for medical cannabis and related offerings, has changed dramatically in London in just the last 12 months. 

That is going to have a major knock-on effect not only in the UK, but in fact the rest of Europe.

The Differentiation in The Cannabis Industry Will Continue to Matter to Markets

As the performance of not only Kanabo, but Australian firm MGC Pharma, which also listed recently on the LSE proves, the market is opening, and dramatically, in Europe, for firms which can prove their medical certification.

It is a much harder road to travel, generally, and requires much more capital to even approach than cannabis cultivation and product manufacture still more widely seen in the United States and Canada. However, this change is a sign of the growing legitimacy of the topic of medical cannabis in even the most conservative of financial circles.

The trend in certification will also show up, inevitably, in every part of the market—including the consumer CBD market. The difference now, as opposed to even several years ago, is that there are firms who are now set up to meet such challenges, as well as a supporting supply chain infrastructure to help them do so.

And while this focus on certification, certainly in terms of raising cash via equity markets or even private placements, may not be common in North America yet, such developments are a trend that is not likely to abate—in any market.



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