FCA guidance on cannabis floats still lacks clarity

The Financial Conduct Authority (FCA) has finally come up with initial guidance on the assessment of cannabis-related companies that want to float on the Main Market. The full guidance will follow in due course.

The UK Listing Authority, which is under the jurisdiction of the FCA, has to approve prospectuses for flotations. The guidance makes it clear that no companies involved in recreational cannabis will be allowed to float in London.

Medicinal cannabis was legalised in 2018 but there has been uncertainty about the appropriateness of companies involved in the sector.

The main problem is that proceeds from overseas medicinal cannabis business may be deemed to be criminal property under the Proceeds of Crime Act 2002. This is still the case if the company has a licence issued by an overseas authority.

UK-based businesses

The FCA says that UK companies involved in medicinal cannabis and cannabis oil can be admitted to the Official List as long as they have the appropriate licences issued by the Home Office. This appears reasonably straightforward.

Overseas companies

Those companies that have overseas licences can only be admitted to a London listing if the FCA is satisfied that their operations do not fall foul of the UK criminal property legislation. The FCA will assess each case individually.

Other companies with overseas activities will have to persuade the FCA that they would be legal if they were carried out in the UK. The FCA will have to understand the nature of any licensing regime and the licences issued.


Standard-list shell Spinnaker Opportunities (LON: SOP) decided to focus on the cannabis processing industry two years ago. At the end of February 2019, Spinnaker agreed non-binding terms to acquire Kanabo Research, which is based in Israel. A share purchase agreement was secured in December 2019. A £200,000 loan facility has been made to Kanabo.

Trading in the shares has been suspended for more than 18 months as the company tries to finalise the acquisition. Spinnaker has been waiting for FCA guidance.

Kanabo is focused on the European legal medicinal cannabis sector. The main parts of the business are formulation of medicinal cannabis oil, distribution of a medically approved vaporiser, cannabis cultivation and production and a ready supply chain.

It is difficult to assess whether this deal will be allowed under the guidance. Presumably, the required licences and approvals have been gained by Kanabo. However, Spinnaker will probably have to wait until the full guidance is published and then for the UKLA to assess the readmission prospectus.

There are cannabis companies quoted on the Aquis Stock Exchange because its growth market does not require a UKLA approved prospectus.

Other companies have hoped to gain a Main Market listing, but it is likely to be a few months before the flotations happen.

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Andrew Hore
Andrew Hore is the publisher of AIM Journal, which is an online monthly publication covering the Alternative Investment Market.