Medicinal cannabis company Akanda is set to debut on the public market today, but should you consider becoming a shareholder?
In stark contrast to the madness of 2021, the 2022 IPO market has effectively all but dried up. Fears around inflation and the general volatile nature of today’s market have caused companies planning to debut to postpone or hold off. Firms such as Justworks and WeTransfer both made eleventh-hour decisions to cancel impending market debuts.
One company attempting to buck the trend, however, is Akanda.
What does Akanda do?
Akanda is a UK-based medicinal cannabis company and wellness platform. The firm is building what it calls “a seed-to-patient supply chain,” which will connect patients based primarily in the UK and Europe with cannabis-related products grown at its cultivation campus in the Kingdom of Lesotho in Africa.
When can I buy Akanda stock?
Akanda will start trading today on the NASDAQ stock exchange. It will trade under the ticker symbol “AKAN” and will be initially priced at $4 per share. Four million common shares will be made available, which would see Akanda raise $16 million from going public.
Akanda’s financials
As of now, the company has no revenue to speak of. This is due to the firm being in a “start-up phase” while it develops its African-based cultivation site. Also, the site has yet to complete a full cannabis harvest cycle under accredited conditions. This first cycle is expected to conclude in March or April of this year.
Akanda has incurred a net loss of $2.3 million and $1.4 million respectively in 2020 and 2019, with much of this attributed to consulting and professional fee expenses. In the nine months ending September 30, 2021, the company had incurred a net loss of over $3.6 million. This stark increase is due to increase operating expenses associated with the build-out of its cultivation site.
Akanda’s growth potential
While the medicinal cannabis market was reportedly worth $16.47 billion in 2021, it is expected to swell to $46.18 billion by 2026, with a forecasted CAGR of 22.9%. The company would have to scale tremendously quickly in order to try and capitalize on this boom in the industry.
Akanda, in its own F-1 filing, admits that “the company is in the preliminary stages of its planned operations and has not yet determined whether its processes and business plans are economically viable.” Strict regulation across Europe — Akanda’s primary market — will also serve to constrain growth at this early stage.
Competition is also rife in the industry, with some of the larger American companies looking at the European market to try and build out their offerings. Notably, Curaleaf purchased European-based Emmc Life Sciences last year to bolster its global footing and allow it to expand to eight new territories.
While Akanda has every chance to grow and develop, it just seems too early in its journey to recommend investing. Too many questions need to be answered, not least, when and how does it plan to make any money?