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London could be centre of Europe's cannabis economy, says vape CEO

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·4-min read
Employees tend to medical cannabis plants at Pharmocann, a medical cannabis company in northern Israel. Photo: Amir Cohen/Reuters
Employees tend to medical cannabis plants at Pharmocann, a medical cannabis company in northern Israel. Photo: Amir Cohen/Reuters

The chief executive of the first cannabis company to IPO in London believes the UK can become a hub for the fast-growing industry in Europe.

“There’s no doubt that this is a huge industry, there’s no doubt that it’s bringing a lot of jobs and taxes," Avihu Tamir, chief executive of Kanabo, told Yahoo Finance UK.

"Now the question is if the UK has an opportunity to lead the path in Europe? I think the answer here is easy as well. There’s no leader for medical cannabis in Europe. The potential is huge."

The global legal cannabis market is worth $17.5bn (£13bn, €14bn) and forecast to grow to $65bn by 2027. Growth is being driven by the legalisation of recreational cannabis in parts of North America and increased adoption for medical use worldwide.

Watch: 'Rally in the wrong' cannabis stocks - advisor

READ MORE: UK start up secures first permit this century for cannabis cultivation

The market is still tiny in Europe — forecast to grow to €2bn (£1.7bn) over the next four years — but Tamir said the sector was at a "tipping point".

“All the growth is still in front of us," he said.

Kanabo chief executive Avihu Tamir. Photo: Kanabo
Kanabo chief executive Avihu Tamir. Photo: Kanabo

Kanabo is set to go public on the London Stock Exchange on Tuesday through a reverse takeover. The listing will mark the first initial public offering of a cannabis company in London, although another business has dual-listed its shares here.

The milestone comes after the UK's Financial Conduct Authority (FCA) last year said medical marijuana companies could list in the UK. The drug was legalised for medical use here in 2018.

READ MORE: Recreational cannabis stocks blocked from listing in London

The FCA ruling led to a "180 degree change" in investor appetite for companies like Kanabo, Tamir said.

"I remember some of the big banks thinking I landed from outer space with the idea of registering a cannabis company in London," he said, recalling Kanabo's first meetings with London-based investors in early 2019. "It’s not Canada here, they told me."

When Tamir began meeting with investors again last month, he found attitudes had changed and there was a huge appetite to invest.

"The roadshow was amazing," he said. "We came out to raise £3m or £4m because we have over £1m in the cash shell. We had demand for almost £12m — 300% oversubscription. We ended up taking £6m and still scaling back everyone by 50%.

Kanabo's inhalator and vape pods. Photo: Kanabo
Kanabo's inhalator and vape pods. Photo: Kanabo

"I didn’t believe that a change of the FCA would be so dramatic in the eyes of even decision makers, not only investors. Banks, big institutions, strategic partners — that are approaching us actively because they do prefer to work with a cannabis company that is transparent and is a listed company."

Decriminalisation of cannabis in North America created a mini-investment boom in 2018, with the first dedicated ETF tracking the sector surging almost 75% that year. Pot stocks plummeted in 2019 but the sector is still seen as a promising growth market.

Tamir said London had the opportunity to become the centre of the emerging sector in Europe.

"Sadly, the European Union is a slow body to move because it's so big, because decision making is taking so much time there," he said.

READ MORE: 5 states pass legal marijuana measures, potentially growing industry by $9 billion

Israeli-based Kanabo was founded in 2017 and makes vaporisers and inhalers for use with cannabis. The company targets the medical market and the "wellness" sector through CBD products, which don't contain the psychoactive compounds of marijuana.

Kanabo's vape pods helped to make cannabis more "precise," Tamir said. Kanabo's extraction and vaporisation mechanism allow for precise dosing, which isn't currently possible for patients who chose to smoke cannabis.

“Coca-Cola is more stable than medical cannabis," he said. "In Coca-Cola, you’re getting it all the same. But the medicine, it’s closer to a wine. You absolutely know that it’s going to be different next year. It’s an agricultural product."

Kanabo's CBD products are already available in Germany and will be launching in the UK soon. The company will use funds from its IPO to start clinical trials of its medical products and hopes to roll them out later this year.

Watch: An official primer to legalised Cannabis