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Cannabis groups race to become first to win London listing

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Cannabis companies are vying to be first of their kind to list on the London Stock Exchange after the UK financial watchdog last year gave the green light to manufacturers of products that use the drug for medical purposes.

Kanabo, which is developing a means to distribute cannabis-derived products for medical patients through vaporisers, is in talks with investors during a roadshow ahead of an expected initial public offering next month. 

MGC Pharmaceuticals, which sells THC tinctures and is developing a cannabis-based epilepsy drug, is in the final stages of preparing to list in London and hopes to raise up to £5m.

The country legalised medicinal cannabis in 2018 but companies in the sector struggled to tap into the UK capital market owing to uncertainty over listing regulations. This prompted the Financial Conduct Authority to set out rules last September that would open the door to those providing the drug for medical use.

Tel Aviv-based Kanabo will be floated through a reverse takeover of a special purpose acquisition company (Spac) called Spinnaker Opportunities, which listed on the LSE in 2017.

Kanabo, which also sells products for CBD consumers in the UK and Germany, has been in talks with the FCA since the ruling. Although the start-up is still awaiting final approval from the regulator, founder Avihu Tamir said the FCA had given enough reassurance to proceed with the IPO plans. 

Mr Tamir said the FCA had been “great” to work with and had provided clear guidance about what was needed to list in London.

The European medical cannabis market was valued at €330m in 2020, according to data provider Brightfield Group. The market for CBD, a cannabinoid that is not classified as a drug and can be sold over the counter, was valued at €1.4bn in the same year, according to Hanway Associates.

The money that MGC is looking to raise will be used to fund phase 2 clinical trials of its cannabis-based epilepsy drug as well as a phase 3 trial of a plant-based treatment for Covid-19 and other infectious diseases that give rise to pneumonia.

“Most of our operations and manufacturing is in Europe, so it makes sense to have the base here, and the LSE is one of the largest stock exchanges in the world,” said MGC Pharma’s chief executive Roby Zomer.

The company, which was founded in 2015, had originally turned to Australia for funding as the cannabis market in Europe at that time was in its infancy.

Emmac, one of Europe’s largest cannabis groups, has also previously flagged its intention to float in London. 

Antonio Costanzo, co-founder and chief executive, told the Financial Times that “we have a few options on the table and one is listing in London”, adding that the FCA’s announcement last year had been “welcome”.

The second licence under UK rules — and the first in more than 20 years — has also recently been granted to grow medical marijuana on a commercial basis. Jersey-based start-up Northern Leaf was in December awarded the permit to grow cannabis for medical use by the government of Jersey under UK Home Office rules. It plans to start supplying drugmakers in the UK, Denmark, Germany, Spain and Portugal by the end of this year.

“Demand is increasing globally and the market is currently undersupplied,” said Campbell Dunlop, chief executive.



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IPOs / FFOs

South Korean video game group behind hit ‘PUBG’ aims for $5bn IPO

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The company behind global hit game PlayerUnknown’s Battlegrounds plans to raise up to Won5.6tn ($5bn) in an initial public offering that is expected to be South Korea’s largest ever.

Krafton said in a regulatory filing on Wednesday that it will sell more than 10m shares at Won458,000-Won557,000 each, with the top end of that range giving it a market capitalisation of Won28tn. The IPO price will be set on July 9 ahead of the company’s listing in Seoul on July 22.

The much-anticipated listing is likely to top that of Coupang, the leading South Korean ecommerce company that raised $4.6bn in New York in March.

Krafton, formerly known as Bluehole, was founded by Chang Byung-gyu in 2007. PUBG, a so-called battle royale game in which players fight to the death on a remote island, was released in 2017 and accounts for the bulk of Krafton’s revenues. The game has sold more than 75m copies across PC and consoles, while its mobile version has been downloaded more than 1bn times. Krafton’s operating profit more than doubled to Won774bn last year as sales jumped more than 50 per cent to Won1.67tn.

However, the company cited uncertainty in overseas expansion and domestic regulation as investment risks.

“Despite our successful experience in entering overseas markets, our past experience does not guarantee our future success given the different language, culture, custom and legal, regulatory environment,” Krafton said in its filing.

South Korea is on track for a record year for IPOs on huge retail investor interest. The benchmark Kospi index is trading near all-time highs, buoyed by ultra-low interest rates and the country’s strong economic recovery from Covid-19. Investment bankers have predicted that proceeds from IPOs will more than quintuple to at least Won25tn in 2021.

Other IPOs in the pipeline include LG Energy Solution, the world’s largest electric vehicle battery maker, which is expected to raise Won10tn-Won15tn in September. Hyundai Heavy Industries, a shipbuilder, is likely to raise $1bn-$1.5bn in August. Smaller deals include the IPOs of Kakao Pay and Kakao Bank, units of the country’s dominant messenger service provider.

“The Krafton IPO will be popular among investors, given investors’ growing interest in new growth areas such as EV batteries, games and online businesses,” said an investment banker close to the deal. “But the company is heavily reliant on just one game and it is uncertain how long the game’s popularity will last.”

Some analysts have raised concerns about Krafton’s high valuation based on its IPO pricing.

“Krafton’s valuation seems stretched, considering that its market cap will surpass NCSoft’s, although NCSoft is making more money than Krafton,” said a local analyst referring to one of the company’s competitors.

Krafton plans to use the IPO proceeds to develop new games, acquire other developers, enter markets including India and the Middle East and invest in technologies such as artificial intelligence.

After the IPO, Chang will hold a 14 per cent stake, followed by Chinese internet group Tencent with 13.2 per cent, according to company filings.

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Made.com valued at £775m in London IPO

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Shares in Made.com fell 8 per cent despite the company pricing them at the bottom of their range in its initial public offering on Wednesday, giving the online furniture retailer a market capitalisation of £775m.

The listing follows the recent debuts in London of online greeting card group Moonpig and vintners Virgin Wines, which have accelerated sales thanks to stay-at-home consumers buying online during the coronavirus pandemic. Both those groups’ shares remain well ahead of their IPO prices.

Deliveroo’s £7.5bn IPO was branded one of the worst In London’s history, however, after its shares — already priced at the bottom end of the range — fell as much as 30 per cent in initial dealings. They remain more than a third below their IPO price.

“It’s a bit disappointing,” said one banker not involved in the Made.com IPO, adding that the 200p a share pricing was “some way below the levels that had been talked about”.

Valuations of up to £1bn had been mooted in the run-up to the listing.

“It’s got a large addressable market and a lot of share to go for, but historically it has wrestled with achieving profitability and scale in the UK market and it has gone ahead and pushed into international markets despite that,” the banker added.

Made.com sold 50m new shares in the IPO, raising £100m, while existing investors including co-founder Ning Li and Brent Hoberman sold 46.9m shares. A further 14.5m shares could be made available as part of the overallotment option. If exercised, that would increase the number of shares to 111.5m and 29 per cent of the issued share capital.

The shares traded conditionally in London on Wednesday, while full dealings will begin on Monday.

The homewares group aims to quadruple annual sales to £1.2bn by the end of 2025. The company has said it plans to invest proceeds from the IPO in marketing and supply chain improvements aimed at reducing the time between customer orders being placed and goods being delivered.

“The IPO is an exciting milestone for Made,” said chief executive Philippe Chainieux. “A listing in London, where the business was founded, will enable us to accelerate our growth.”

Made.com generated £315m in sales last year. The group, founded by entrepreneurs Ning and Hoberman in 2010, sells to about 1.2m active customers in the UK, Germany, Switzerland, Austria, France, Belgium, Spain and the Netherlands and plans to expand beyond Europe.

After admission, growth-focused investors Level Equity and Partech will be the largest investors in the group, holding 14 and 11 per cent respectively, followed by companies linked to Ning with 8.8 per cent.

Fund management groups Majedie, Axa and NFU Mutual will also be top-10 shareholders, while a vehicle controlled by Hoberman will own 5.5 per cent.

The float is the latest in an increasingly active IPO scene for so-called digitally native businesses.

Victoria Plumbing is due to float on London’s junior market early next week, with pricing details expected on Thursday, while shares in German online fashion retailer About You began trading in Frankfurt on Wednesday and Berlin-based online optician Mister Spex announced its intention to float on Monday.



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Hong Kong tycoon Richard Li’s FWD to raise up to $3bn in US IPO

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FWD, the Asian insurer founded by the son of Hong Kong tycoon Li Ka-shing, has filed for a US initial public offering in what would be one of the year’s biggest listings.

The company launched by Richard Li in 2013 said on Thursday the number of American depositary shares to be offered and the price range for the IPO had not yet been determined and the timing of the listing was subject to regulatory approval. But the company could seek $2-3bn from the share sale, according to people familiar with the situation.

FWD has expanded aggressively across Asia, rapidly rolling out a network across 10 countries including Japan, the Philippines, Vietnam, Singapore, Malaysia, Thailand and Cambodia.

The insurer has almost 10m customers, more than $63bn in assets and about 6,100 employees as well as 33,000 agents.

Richard Harris, a fund manager at Hong Kong-based Port Shelter Investment Management, said FWD “has made enormous gains [in market share] because it’s got a lot of firepower behind it”.

As with Li Ka-shing’s Cheung Kong conglomerate, FWD “takes a strategic view on industries and invests very heavily in them”, Harris said.

He added that it was “interesting” that the insurer had chosen to list in New York over Hong Kong, but US investors “will be interested [in FWD] and there does seem to be a slight thawing with the view towards Chinese companies — and this will be recognised in New York as a Chinese company”.

Li started FWD with the $1.2bn acquisition of ING’s pension and insurance businesses in Thailand, Hong Kong and Macau. The expansion strategy of Huynh Thanh Phong, FWD’s chief executive, has focused on pairing moves into new Asian markets with the use of technology to reduce the paperwork and complexity common to the industry in the region.

The group has swallowed up competitors as rival financial groups have retreated from the region, including MetLife’s Hong Kong business and the insurance business of Thailand’s Siam Commercial bank, the industry’s largest-ever takeover in south-east Asia.

“[SCB was] the prize asset that everybody wanted to go after,” Phong told the Financial Times in an interview this year. FWD eventually acquired SCB for about Bt93bn ($3bn) in 2019, giving it a 36 per cent market share in Thailand in bancassurance terms, bigger than the next three groups combined.

FWD has submitted a confidential filing for the IPO to the US Securities and Exchange Commission. That will allow it to submit other documents confidentially to the SEC before filing a prospectus publicly.



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