European Cannabis Companies Race To The Nasdaq: $1B In Tax Break On The Horizon

Some European cannabis companies are already planning initial public offerings (IPOs) on the Nasdaq, encouraged by the prospect of a less restrictive regulatory environment. The potential rescheduling of cannabis to Schedule III of the Controlled Substances Act and Germany’s recent decriminalization have ignited optimism within the sector.

Grow Group, a UK-based medical cannabis distributor, is spearheading this movement with a planned Nasdaq IPO in early 2025. CEO Benjamin Langley told the Financial Times about the investors' interest in the industry. “What we’re seeing now, is that loosening up such that people are deploying funds and there is money again in this space,” he said.

Somai Pharmaceuticals, a Portuguese player and UK's Wellford Medical are also considering Nasdaq listings. "If the US [reclassifies], coupled with the legislative change in Germany, it could be the perfect time for us and . . . investors to catch that sentiment wave," Wellford’s Joshua Roberts told Financial Times.

The Drug Enforcement Administration's proposed rule change to reclassify cannabis could significantly impact the industry by reducing exorbitant taxes, stimulatinig clinical research and potentially unlocking the world's largest cannabis market.

Why This Matters

Listing on Nasdaq offers European cannabis companies significant advantages, especially amid current regulatory shifts. First, it provides access to a broader pool of global investors, while Nasdaq's stringent regulatory standards enhance company credibility and attract institutional investors. Also, with increased visibility, Nasdaq’s market liquidity favors better share trading and valuation. Meanwhile, the anticipated US regulatory easing could further amplify these benefits.

Read Also: A $2 Billion Opportunity In Cannabis: How A Tobacco Giant Is Helping Organigram Seize The German Market

Taxes And Rescheduling

President Joe Biden's plan to reschedule cannabis from Schedule I to Schedule III promises significant tax benefits for the cannabis industry. This change would alleviate IRS tax code 280e, allowing companies like Curaleaf CURLF and Trulieve TCNNF to deduct normal business expenses, potentially saving over a billion dollars in taxes. Pablo Zuanic of Zuanic & Associates suggests these savings could boost cash flows, enabling growth and expansion.

Curaleaf could see a 92% increase in operating cash flow, while Trulieve's operational efficiency positions it well for revenue growth from legislative changes in key markets. Analysts believe these tax savings could lead to substantial revaluation and market cap growth by 2030.

Cannabis Across The Atlantic

Curaleaf, a leading US cannabis company, has shown significant growth in Europe, particularly in Germany. The company’s vertical integration and supply chain control have resulted in impressive margins. CEO Boris Jordan emphasized the importance of US regulatory changes, stating, "We'll see what happens in the U.S. with rescheduling and make decisions based on that."

IM Cannabis Corp. IMCC is intensifying its focus on the German market following recent legalization, enhancing its supply chain with a new EU-GMP supplier. Curaleaf International is also expanding in the UK, Germany, and Poland, aiming to outprice illegal cannabis and navigate regulatory landscapes. Their strategic moves target growth potential in markets where regulatory changes and medical cannabis acceptance are increasing.

InterCure INCR, a leading seller of pharmaceutical cannabis outside North America, is poised to benefit from the potential rescheduling of cannabis in the U.S. and growing demand in Germany. With experience in Israel, InterCure has a competitive edge and is expected to see significant growth from domestic demand and entry into the German market. The company's ability to produce high-quality cannabis at scale with minimal additional capital expenditure adds to its strategic value.

Read Next: 

• Curaleaf International Is Beating Illicit Cannabis Prices In UK And Germany - What's Next For EU Expansion?
• These issues will be a hot topic at the upcoming Benzinga Cannabis Capital Conference in Chicago this Oct. 8-9. Join us to get more insight into what the wave of weed legalization means for the future of investing in the industry. Hear directly from top executives, investors, advocates, and policymakers. Get your tickets now before prices go up by following this link.

Photo: AI-Generated Image.