Akanda intends to connect patients in the U.K. and Europe with products it grows in Lesotho, in Africa.
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Shares of the medical cannabis company Akanda soared about 163% in its first day of trading.
The company (ticker: AKAN) is the first to list via a traditional IPO this month. The stock opened at its high of $30, and closed Tuesday at $10.50, up $6.50.
Akanda is a low-float, microcap stock. Because relatively few shares are trading, some investors buy into such companies, thinking they can get a “quick run on the stock,” said Matt Kennedy, senior IPO strategist at Renaissance Capital.
It can turn out that way. For example, Yoshitsu (TKLF), a Japanese beauty retailer, rocketed 700% in its market debut in January. Yoshitsu raised $24 million after pricing its IPO at $4. The stock closed its first day of trading at $40.99, but shares have since given back those gains. On Tuesday, Yoshitsu stock ended at $2.05, down about 95% from its debut.
Yet there is also Smart for Life (SMFL), a nutritional supplement company, which priced its IPO at $10 on Feb. 16. The stock closed its first day at $2.68 and is now trading at 95 cents.
But some microcaps do well over longer periods. Blue Water Vaccines (BWV), a biotech, rose more than 500% from its $9 IPO price last month, closing at $57.40 on Feb. 18. The stock has retained those gains and finished Tuesday at $67.90, an 18% increase from its first day.
Microcaps can trade “all over the place,” Kennedy warned. Investors who get shares before the IPO begins trading can potentially see huge gains. But those who are buying in the open market are likely “trying to time a favorable swing,” he said.
“[Microcaps] now have a reputation among some traders for potentially offering huge gains for anyone willing to gamble,” Kennedy said.
Late Monday, Akanda collected $16 million after selling 4 million shares at $4, the bottom of its $4 to $6 price range. The U.K. company plans to target the international medical cannabis market, which is estimated to be worth about $47 billion by 2027, the prospectus said, citing Emergen Research.
The company intends to connect patients in the U.K. and Europe with products that it cultivates at its facilities in the kingdom of Lesotho in Africa. Akanda has minimal revenue and isn’t profitable. It plans to use proceeds from the IPO for “property, plant and equipment, operations, working capital and general corporate purposes,” a statement said.
Write to Luisa Beltran at [email protected]
