Is Akanda IPO Stock a Good Investment?

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Contributor, Benzinga
February 23, 2022
$0.0928
-0.0013[-1.38%]
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Vol / Avg.4.499M / 4.100MMkt Cap1.107M
Day Range0.093 - 0.11052 Wk Range0.091 - 2.700

Described in 1850 as a medicinal compound, the origination of cannabis in the U.S. started innocuously if not endearingly. But by the next century, the narrative completely shifted, with politicians using the much-maligned plant to form wedges among various population groups.

Still, through reform and a deeper understanding, both the U.S. and several members of the international community are undergoing a major rethink toward marijuana legislation. It’s under this framework where the introduction of Akanda Corp. presents upside opportunities but also severe risks.

What Does Akanda Do?

A botanical specialist focusing on the international medical cannabis and wellness industry, Akanda Corp. is, if anything, one of the most structurally intriguing new listings to enter the capital market in recent memory. Based in the U.K. and incorporated in Canada, Akanda’s manufacturing operations occur in the Kingdom of Lesotho — a mountainous country surrounded entirely by South Africa. Interestingly, Lesotho owns the distinction of being the southernmost landlocked country in the world.

Typically, publicly traded companies with ties to the African continent focus on resource-extraction businesses. However, Akanda aims to change this framework through its four main pillars of operation.

  • Medical cannabis: Focus on the manufacturing and distribution of high-quality medical cannabis and wellness products to organically improve quality of life for customers in legal jurisdictions.
  • Pharmaceutical quality: Leverage the ideal conditions of Lesotho with the high-efficiency business models which Akanda’s partners provide to generate cannabis that meets good agricultural and collecting practices (GACP) guidelines at scale.
  • Ethical principles: Through a commitment to environmental, social and governance (ESG) considerations, Akanda particularly drives support for empowering women and vulnerable populations within Lesotho’s communities.
  • Patient access: Evangelize the benefits of patient access in legal international markets so that more people will have avenues for alternative botanical solutions.

Per Akanda’s website, it labels Lesotho as the “largest medical cannabis cultivation zone on the planet.” With increasing awareness of Africa’s role in the botanical industry, Akanda could be an early frontrunner in the burgeoning space, though extreme caution is a must for interested buyers.

When is the Akanda IPO Date?

Scheduled to enter the capital market at the stern of the final complete week of February, Akanda’s initial public offering (IPO) may encounter a relatively muted response because of multiple distractions afflicting Wall Street. But barring any unexpected disruptions, Akanda will likely officially price its offering on Feb. 24, 2022, hitting the IPO calendar one day later.

Shares will trade on the Nasdaq exchange under the ticker symbol AKAN.

Although the idea of a rapidly expanding cannabis cultivation economy in southern Africa will undoubtedly pique curiosity among market observers, it’s important to realize that financial realities have already started to mitigate some of the early enthusiasm. Indeed, assessing the timeline for Akanda’s journey into the public fray is instructive.

Back in November 2021, the cannabis specialist submitted a confidential draft registration statement on Form F-1 with the U.S. Securities and Exchange Commission (SEC) regarding its IPO intentions, per Akanda’s press release. Back then, the document represented a placeholder, with no terms listed for the offering.

Later, on Jan. 31, 2022, the company set the terms for its IPO, declaring an intention to raise $20 million through the distribution of 4 million units of AKAN stock at a per-share price range between $4 and $6. At the midpoint of this estimate spectrum, Akanda would have commanded a market capitalization of $142.8 million.

However, earlier this month, management lowered expectations for the offering, instead aiming for a raise of $16 million. While the distributed number of shares will remain the same, Akanda anticipates that the per-share price of the deal will drop to the keel of the previously disclosed range.

Back home, it’s possible that AKAN stock could attract interest among speculators, especially younger traders. According to an April 2021 report from the Pew Research Center, “Americans overwhelmingly say marijuana should be legal for recreational or medical use.” The only major demographic mostly opposed to recreational legalization is the over-75 crowd.

Moreover, an effort is underway to correct historical wrongs associated with discriminatory practices regarding enforcement of anti-drug laws. According to Benzinga editor Javier Hasse, the National Expungement Works — a social justice advocacy organization — helped tens of thousands of impacted Americans expunge or seal their records.

But what about cannabis sentiment abroad? As a BBC News report in December 2018 noted, multiple countries from Uruguay to New Zealand have broadcasted to varying degrees of magnitude shifting opinions concerning botanical control and regulation. Therefore, it’s quite possible that AKAN stock could benefit from increasingly progressive attitudes toward marijuana.

Still, cost structures will be a key concern, not just for Akanda but for the broader cannabis industry. With consumer inflation soaring, every day that the U.S. Federal Reserve fails to take aggressive action may price out access to legal cannabis for average-income households, thus incentivizing the very black market that legalization sought to mitigate, if not outright eliminate.

What Analysts are Saying About Akanda IPO

Because of its structure as a small-cap stock — some would argue that it’s a nano-cap play — not too many analysts have an opinion regarding the upcoming IPO of AKAN stock. However, those analysts speak of the need to balance Akanda’s upside potential with blunt fiscal realities.

On the positive end, market experts are focused on Akanda’s underlying regional advantages. According to Sibusiso Xaba, an investment banker and co-founder of The ACA Group, an advisory firm focused on the African cannabis market, the southern Africa region is one of the top places on the globe to grow cannabis of all strains.

Within this expansive region, “Lesotho is a front runner in the legal African cannabis industry,” stated Xaba. Primarily, this status banks on the country’s progressive rules on the commercialization of cannabis.

Further, Mark Corbett, the managing director of Highlands Investments, emphasizes that the landlocked country’s enticing profile isn’t just limited to the commercial cultivation profile. Rather, Lesotho “is one of the only three countries in the world to legalize manufacture, distribution, import and export of both THC [tetrahydrocannabinol] and CBD [cannabidiol].”

Finally, geological factors may directly benefit the upcoming new listing of AKAN stock. Lesotho happens to be located in one of the world’s highest countries above sea level. Therefore, Xaba notes that the combination of “fertile, clean soil, abundant water and clean air are a great climate for cannabis.”

Still, not everyone is convinced. As skeptical analysts have stated, Akanda lacks the fiscal substance of other enterprises making their debut in public exchanges, only featuring nominal revenue. Thus, it’s extremely difficult to peg a meaningful valuation on AKAN stock.

As well, management pours into multiple risk factors in its IPO prospectus, dedicating about 15% of its content toward what could go wrong. Though required to disclose such risks by law, such robustness of divulgence may be unnerving for some prospective investors, considering that the management team represents the people closest to the business at hand.

Akanda Financial History

As mentioned right off the bat on its Form F-1, Akanda is an early stage emerging growth company commanding “a limited operating history and minimal revenues to date.” Moreover, the firm’s leadership team openly admits that it will “require funding from this offering to expand and further develop our operations.” As well, a successful IPO is necessary for Akanda to develop sales channels in key international markets, particularly Europe, the U.K. and Africa.

By early stage, Akanda is truly stretching the definition of this word to the point of euphemism. Again, per its own prospectus, the company’s revenues from the sale and distribution of medical cannabis in the U.K. “have not exceeded more than $4,000 in any 12 month period since the inception of our operations.”

If you have any inclination about participating in this IPO, you must conduct thorough due diligence as AKAN stock could easily go awry.

Akanda Potential

While the cannabis cultivation business represents a potentially huge catalyst for AKAN stock — with Fortune Business Insights projecting that the global green sector could reach nearly $198 billion by 2028 — it’s the transformative effect of the underlying company that might swing the needle in its favor.

For years, Lesotho — thanks to its mountainous terrain — has been a valuable source of diamond mining. However, as Harvard University and myriad other leading research institutions decry, the diamond industry is often exploitative, facilitating gross violations of basic human rights. By focusing on cannabis, Akanda can promote greater wealth equity in the region.

However, the irony of the underlying business is surely not lost to observers, who will note that cannabis features a long and troubling past of discriminatory practices. Now, because of economic pressures, the black market could rise to disrupt the equitable normalization of marijuana.

Where to Buy Akanda IPO Stock

Those intrepid enough to consider Akanda’s public debut must acquire shares through the open market, necessitating knowing how to buy stocks. In addition, investors should take the time to consider the platform that ideally fits their needs. A list of best brokers is below.

AKAN Restrictions for Retail Investors

Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged information.

AKAN Pre-IPO

With the new listing of Akanda fast approaching, the pre-IPO window has closed. However, those interested in early bird opportunities should open an account with Freedom Finance.

About Joshua Enomoto

His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.