Chilled? No, cannabis bosses are fuming – after share price highs came down with a bump, leaving them tangled in… weed wars
Devotees of marijuana claim it chills them out. But among the UK’s fledgling cannabis firms, it is having the opposite effect.
Extraordinary boardroom rows have erupted at three of the companies: Love Hemp, Chill Brands and Oxford Cannabinoid Technologies.
The bust-ups, bruisingly for investors, have been accompanied by a plunge in share prices.
‘Pot stocks’ – shares in companies that are seeking to profit legally from the drug – rushed on to the London Stock Exchange when it relaxed its rules in early 2021.
The hype around the industry became even more heady as companies won backing from celebrities including David Beckham and US rapper Snoop Dogg. But unedifying ‘weed wars’ have broken out at several firms and the high has been followed by a big comedown.
Ambassador: US rapper Snoop Dogg helps to market Oxford Cannabinoid Technologies, whose value has fallen by £35 million since 2021
The board of Love Hemp, which counts boxer Anthony Joshua as its ambassador, is mired in a dispute with its former boss Philip Small.
Last week, it issued an extraordinary statement in response to claims made online by Small, which are thought to focus on the company’s finances. Love Hemp accuses him of having ’caused significant disruption to the group’ and says it had to settle a harassment case with an ex-employee due to his ‘inappropriate behaviour’.
The firm added that it could not justify the decision of the previous board to appoint him as managing director because of his ‘previous tax affairs’. Small described the comments as ‘unfounded’.
It is yet another embarrassment for Love Hemp, whose shares have been suspended since May after its corporate advisers resigned.
The firm – whose products including cannabidiol-infused chocolate balls, oils and gummies are sold in Boots, Ocado and Holland & Barrett – was separately fined £70,000 by Aquis, the London-based challenger share exchange, for rule breaches including the publication of misleading information.
Love Hemp was approached for comment.
Love and peace is in short supply in the emerging industry, which has seen cannabis migrate from student bedrooms to the stock market. The drug is a Class B substance in the UK, so its use and possession for recreational purposes is illegal.
But the market for pharmaceutical pot stocks in London took off in 2018 when medicinal cannabis was legalised. Two years before, cannabidiols, the non-psychoactive extract of cannabis, began to be regulated when their use exploded in popularity. Many firms listed on Aquis.
Cannabis shares had already become popular in North America after Canada legalised the drug for medicinal and recreational use and several US states relaxed laws.
Sales of products such as face creams, chewable gums and oils containing cannabidiols – or CBD – also surged, with their users claiming they helped them relax.
But any pleasant effects for investors soon wore off. Investment expert Clem Chambers said: ‘Cannabis stocks were a big thing in the US and this fashion came to the UK. But they slumped in the US and the UK was sure to follow.’ Love Hemp’s share plunge has been mirrored at several of the biggest UK-listed cannabis firms including Cellular Goods, which is backed by David Beckham. Others that have fallen to earth include Kanabo, MGC Pharmaceuticals, Chill Brands and Oxford Cannabinoid Technologies. Collectively, they have lost £89 million of value.
Chill Brands, the new name for what was formerly an oil and gas group in Colorado, has been riven by a row with a former executive. The firm launched legal action late last year in a US court against former chief commercial officer Michael Sandore. It says he made a number of ‘disparaging’ remarks about the group and pretended to be higher up the management hierarchy than was the case – claims that he disputes. Boss Callum Sommerton said he hoped to reach an out-of-court settlement soon.
Chill Brands has also had to raise fresh cash from investors several times. Dame Ann Gloag, co-founder of Stagecoach, became a backer in a fundraising last year.
Harmony was also hard to come by at pharmaceutical cannabis firm Oxford Cannabinoid Technologies, which is backed by Snoop Dogg. There, co-founder Gavin Sathianathan failed in his attempt to oust several board members over what he described as ‘ongoing and worsening value destruction’.
When Oxford Cannabinoid Technologies was listed in May 2021 it was worth £48 million. It is now worth just £7.5 million.
Sommerton argues that the industry is prone to disputes because it is so new. He says: ‘Companies are finding their feet in a market – which only opened in 2018 – that is continuously changing.’
Why investing in CBD may yet pay off
Remember the dotcom boom? When it turned sour the world wide web seemed a busted flush. More recently, big tech stocks have had a tough time, but Google, Apple and Amazon have all generated big long-term returns on investors’ cash.
The cannabis market may be at a similar stage. Many firms have jumped on the bandwagon, some selling cannabidiol (CBD) products, others focused on prescription drugs. Most have failed to deliver for shareholders. Yet the market for CBD products in the UK, already valued at £690 million a year, is expected to reach £1 billion a year by 2025.
Cambridge’s GW Pharma shows what can be done. First listed in London, the medical cannabis specialist was sold for $7 billion (£6 billion) in 2021. Firms trying to emulate it are Oxford Cannabinoid Technologies, Apollon Formularies and MGC Pharma.
One way in is via Associated British Foods, which owns Primark and British Sugar, but is also one of the largest producers of CBD, grown in Norfolk, and used in children’s medicine. Adventurous investors may look at Puresport, backed by rugby star Finn Russell. Specialising in mushroom-based supplements too, it is not listed yet but had a crowdfunder last year and may be back for more.
Joanne Hart, investments editor