European cannabis firms banking on higher IPOs in US upon rescheduling

A growing number of European cannabis startups are considering initial public offerings in the United States, where they expect higher valuations in New York than on a London-based exchange.

But that’s only if the Biden administration’s ongoing efforts to reschedule marijuana are successful, according to the Financial Times and Euro News.

U.S. law currently prohibits American plant-touching companies from listing on major American stock exchanges.

However, operators in Canada – where marijuana is legal at the federal level – such as Canopy Growth Corp. (CGC) and SNDL are permitted to list on the Nasdaq.

English, Portuguese companies interested

England-based medical cannabis operator Grow Group has raised 12 million pounds (roughly $15.6 million) since its 2017 inception, but the company declined to go public on the London Stock Exchange last year when investors didn’t bite.

Now, with capital interested in the United States’ potential rescheduling, CEO Benjamin Langly told the Financial Times he believes Grow Group can go public on the Nasdaq exchange in the first quarter of 2025 with a valuation of 100 million pounds.

Another company, Portugal-headquartered cannabis exporter Somai Pharmaceuticals, wants an IPO valuation of 250 million euros (roughly $273 million) via a Nasdaq IPO, CEO Michael Sassano told the FT.

Recategorizing could sway risk-averse exchanges

The U.S. Drug Enforcement Administration in May published a formal proposal to move marijuana from Schedule 1 of the Controlled Substances Act to Schedule 3.

It’s understood that rescheduling would encourage risk-averse stock exchanges and banks to reconsider their opposition to engaging with the marijuana industry.

Executives also stressed the need to convince investors that a U.S.-based stock exchange won’t experience the boom-and-bust cycle seen among public cannabis companies currently listed in Canada.

These include onetime retail investor darlings such as Canopy Growth and Tilray Brands, which have lost 98% of their value over the past five years.

Both peaked shortly after Canada legalized recreational cannabis nationwide in 2018.

U.S.-based firms that have listed on Canadian exchanges have experienced similar cycles but have retained value as more states move to regulate the drug.