European Cannabis Q4 2022 Quarterly Update

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If the third quarter was painfully slow, the fourth quarter of 2022 was absolute torture for cannabis markets in the European Union (EU) and abroad. 

A Slow Finish for EU Cannabis in 2022

Most quality EU cannabis companies raised capital early last year, leaving behind poorly funded startups and many companies that ran out of cash over the year. Even the companies that raised money early in the year seemed to have slowed by the end of 2022, as expected regulations and patient counts lagged behind the previously optimistic growth models for the EU cannabis industry. 

Small Victories in EU Cannabis Market

Although EU numbers are a few quarters behind, sales have likely increased compared to 2021. Portugal continued to emerge as the leading EU exporter, probably more than doubling last year's output. 

4th Quarter Cannabis EU Legislative Events

Most EU cannabis industries saw similar roadblocks and legislative setbacks. Though the sector achieved some incremental change, it fell far short of hopes and projections. 

Germany Lays Cannabis Regulatory Framework

The long-awaited 15-page German Health Ministry regulatory pre-framework report was finally released in 2022. The information coincided with expectations of an added Hail-Mary pass to the EU for support. Germany has yet to receive a positive answer from the EU on their proposed recreational market. If forced to go it alone, Germany will face an expensive internal buildout. Even if this phase is successful, it will likely increase the illicit market. Germans will only have legal access to the most expensive, internally grown, carbon-footprint-free cannabis on the planet, and many will seek cheaper alternatives.

Italy’s Tumultuous Politics Impact Cannabis Market Progress

Italy, the second-largest cannabis market in the EU, grappled with demands far exceeding their capacity which is rumored to be more than four times the demand than supply.. The previous Director of UCS, the central narcotics office for Italy, had stepped down and a new one was not appointed by the end of the year and next year's appointee seems more pro-cannabis then the predecessor.

The Health Ministry approved cannabis extracts, directly circumventing the Italian army’s control on flower distribution. This move signals the Health Ministry’s preference for extracted cannabis products. 

Italy’s cannabis markets finished 2022 with further disappointment; tender results did not come through as expected, postponing real progress until 2023.

Spain Struggles to Get Its Big Market Moving

Expected to be the next biggest market in Europe, Spain failed to launch their legislative efforts by the end of 2022. However, they did announce that the regulations are very close to finalization and hinted that not everyone would get what they want when more information is released. 

The current consensus is that the Spanish medical cannabis program will likely closely resemble the current German program. The program may expand from magisterial preparatory products to finished products and will likely favor extracted cannabis preparations.

A Peek at Cannabis Movement Outside the EU

Cannabis news outside the EU was slower than expected in the final quarter of 2022. 

US Federal Cannabis Business Legitimization Efforts Stall

The United States markets failed to advance any of the three main cannabis-related acts that were in consideration this year. The Secure and Fair (SAFE) Banking Act, the Health, Opportunity, and Personal Empowerment (HOPE) Act, and the Gun Rights and Marijuana (GRAM) Act all failed to secure traction. This inaction sent the market even lower and potentially closed the U.S. cannabis market’s coffin for another three years.

At least Brittney Griner made it home in the fourth quarter — even while thousands of U.S. citizens are in jail for similar nonviolent cannabis charges throughout the U.S.

On top of the legal quagmire the U.S. has fostered surrounding cannabis, high taxation and lack of traditional banking have stifled the financial health of U.S. cannabis companies and dampened the mood of investors. It is indeed possible that in 2023, cannabis in the EU could be more eventful than in the U.S.

Other Countries with Emerging Cannabis Markets

Countries like Thailand and Brazil got off to rocky starts in their respective cannabis industries. Both had legislation that seemed solid at the beginning of 2022 but was derailed by the year's end. However, both markets are progressing with their programs despite regulatory approval delays. 

More countries signaled they would be revisiting their stance on cannabis going into 2023. Globally, the fourth quarter featured lackluster movement for cannabis policy in 2022 and plenty of forecasting for more of the same in 2023.

Q4 2022 EU Cannabis Mergers and Acquisitions

Fundraising for the cannabis industry mirrored the malaise of regulatory grey zones and progressed at an anemic pace during the fourth quarter. Many companies needed access to funds, and there are rumors of a few large growers cutting staff and even potentially closing over the coming months. The only two significant transactions were Cantourage and Hellenic Dynamic.

Cantourage and Hellenic Dynamic Shine in Q4 Cannabis M&As

Cantourage finally listed on the Frankfurt Stock Exchange (FSE). The company reportedly offered 15% of their company (1.9 million shares) at 6.48 euros, valuing Cantourage at approximately 80 million euros. It is unknown how much they raised in reality, as the company boasted of being on course to triple the 5.2 million euro revenue line from 2021. The stock surged 300% on the first day of trading and continued up on light volume before eventually settling gently. 

Hellenic Dynamics Cannabis launched its initial public offering (IPO) on the London Stock Exchange after raising 1.125 million pounds to value the company at around 17 million pounds. Again, light trading up and down through the fourth quarter was a gentle reminder of current interest in cannabis.

High Hopes for Cannabis in 2023

Undoubtedly, the fourth quarter of 2022 only fueled dreams of a more productive 2023. 

The first two quarters of 2022 saw a frenzy of activity that slowed quickly over the remaining two quarters. Investor fatigue became apparent as they sat on the sidelines while the year closed. 

The year ended with large amounts of tax-loss selling. Few signs indicated significant regulatory advancements to help reinvigorate the stock market or fund companies that desperately needed cash. 

Let’s hope 2023 shakes off the overall economic sluggishness and we see some critical regulatory moves that push global cannabis industries to the next level. Cannabis 2023 is all we have now!

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