PERSISTENCE has paid-off for an Israeli businessman and a UK lawyer after the London Stock Exchange issued its first ever listing guidelines for cannabis firms.
Roby Zomer, Co-Founder and Managing Director of MGC Pharmaceuticals, says the pending change sets-up the UK for a huge influx of cannabis capital.
This time last year MGC and its lawyers Memery Crystal submitted its market listing prospectus to the LSE and, after a few weeks, they were given the go-ahead to proceed by the UK Listing Authority.
At the time, MGC was one of a handful of companies who were hoping to secure an LSE listing, with more expected to follow.
However, in February this year, they learnt the UK Financial Conduct Authority (FCA) had put the applications on hold.
The FCA determined those companies looking to list may be at risk of transgressing the Proceeds of Crime Act (PoCA), which bars a UK company from benefitting financially from an activity which is illegal in this country – in this case, recreational cannabis.
Mr Zomer told BusinessCann: “However, we said we will test this. We said that if we are crossing PoCA we will change, or we will we stop. But if we are not, we will proceed and we will list on the LSE, as there is no reason for them to stop us.
“So, we responded to the LSE, telling them we disagreed, that we challenge their findings and that we are a medical cannabis company and medical cannabis is legal in the UK. Therefore, we don’t believe that what you say is correct. We were the only company to push-back.”
This approach was again refused, so they made a further challenge and last month they received a letter from the FCA – on the same day as it launched a consultation on its first listing guidelines for medical cannabis companies.
This U-turn was on September 18, and MGC is now revisiting its market prospectus and hoping to be listed over the coming months.
Mr Davis confirmed itself and MGC has been involved in a ‘robust dialogue’ with the FCA.
“We have worked quite tirelessly with the FCA for some time and we have finally got the guidance that we sort.
“They couldn’t have been satisfied with this grey area, which had existed for some time. We exchanged views and they also took time off to talk with the Home Office and come back with a legal position that was clear. They’ve done that, now, so we’re delighted,” he said.
A spokesperson for the FCA told BusinessCann the new listing rules for cannabis companies ‘had been driven by companies in the sector who are interested in listing in London’.
MGC is focused on developing pharmaceutical drugs from the cannabis plant, its current portfolio including the anti-epilepsy drug CannEpil.
It is listed on the Australian Securities Exchange and last month it secured an A$15m investment from US-based investor Mercer Street Global Opportunity Fund LLC for future growth.
Mr Zomer elaborated on its reasons for heading to the LSE: “First of all, being on the main platform will give us access to new capital, to strong capital.
“The LSE is a strong market, and is in a strong position, and, being one of the first to market is a key advantage in any industry.
“Like any industry, once you have a capital market able to support it and support it legally, then socially, it’s a boost to the whole industry.
“You simply have more access to build more distribution, manufacturing, more clinics, more marketing, more patient appointments and as it becomes more accepted it becomes standard, and not to something that is illegal.
“More doctors will see it’s legitimate to prescribe it and more patients will want to access it.
“This is also good news for investors. The UK public are not able to invest in this sector because the Canadian, Israeli or American companies, may be involved in recreational cannabis, which is illegal in the UK.
“We need to change public opinion and this will happen when it’s not just legal to prescribe, but it’s also legal to invest.”
“As we progress I believe the UK industry will be big, at least as big as the German industry, and with the UK being the main European market, people from from the European Union will also invest in the UK market. “
Memery Crystal is an international law firm based in London and headed by Chief Executive Nick Davis, one of the UK’s leading cannabis lawyers.
He welcomes the release of the preliminary guidelines following months of endeavour on behalf of its clients. He believes that within the next year we could see around half a dozen firms list on the LSE.
He said: “We have been active with the authorities in opening up the market for companies which meet the criteria that we work to. Which is, only legal companies working in the medical cannabis space that meet all of the requirements in the UK not to transgress PoCA.
“A huge amount of time and money is hopefully going to come to fruition by successfully listing these companies.
“This is all driven by a belief in the industry; a belief in the power of cannabis medicine. This is also about patient access to the medicines that they need and if the capital markets can help secure it, then so much better.”
He believes that despite the hold-ups in the listing process and the economic uncertainty caused by Covid-19 there is an appetite amongst investors for cannabis.
“Companies can now access the deep pool of capital that sits in London. Whether that happens will now be down to investors.
“I certainly had a view 19 months ago on the appetite for investors. I think the world’s an interesting place right now. But, certainly the family offices continue to be interested and some of the alternative funds.
“The question is; Will medical investors, pharmaceutical investors, generalist investors come into the sector? And will this statement by the FCA have got their compliance officers comfortable enough?”
As for the institutional investors? Mr Davis continued: “We need some extraordinarily high-quality companies to come and join the market and bring their businesses with them to enable that.
“Hopefully, investors get very comfortable with the quality of the companies and the management of the product and their investment thesis.
“These companies will be judged on the same investment metrics as any other company in the life sciences base. I hope.
“I believe in the future of the medical cannabis market and therefore, I believe that investors will, with the right education and the right comfort around the legality, find these companies interesting!”
He believes the first wave of listings will mainly feature the more mature Australian, North American and Israeli companies.