On October 5th, 2018, GW Pharmaceuticals plc (NASDAQ:GWPH) announced that it had closed an underwritten public offering on the Nasdaq Global Market of 1,900,000 American Depositary Shares and the full exercise by the underwriters of their option to purchase additional ADS’s from GW, raising gross proceeds of $345,230,000 before commissions and expenses.
Given the high level of marijuana stock deal flow in the Canadian markets, when it comes to capital raises for public cannabis companies, we’re used to seeing the same group of Canadian financial firms getting mentioned in marijuana deals like GMP Securities, Mackie Research Capital, Canaccord Genuity, and a few others now and then.
U.K.-based GW Pharmaceuticals’ capital raise was different, however. After all, GW Pharmaceuticals is not your average cannabis company. The only thing more impressive than the fact that GW Pharma raised nearly $350 million, is the list of top-notch investment banks that participated in the raise.
Three out of four of them are widely considered to be bulge bracket firms, which exemplifies a turning of the tides when it comes to Wall Street’s participation in weed deals.
Why Wall Street Likes GW Pharmaceuticals
It comes as no surprise that Wall Street’s interest has be piqued by GW Pharmaceuticals though. Recently, the company received FDA approval and DEA Schedule V status for EPIDIOLEX®, a CBD-based treatment for rare forms of epilepsy.
Not only did this make GW Pharmaceuticals the first company in the world with FDA approval for a plant-derived cannabinoid drug, but it also substantially de-risked shares of GWPH as an investment.
GW Pharmaceuticals is also unlike any of the state-level cannabis operators in that the company is not breaking U.S. federal laws at all. This makes shares of GW Pharmaceuticals eligible for investment from larger institutions and funds, hence why the company has nearly 250 institutional shareholders.
Since the FDA approval, everyone ranging from CNBC Mad Money host Jim Cramer to Goldman Sachs’ analyst Salveen Richter have been bullish on shares of GWPH. If there’s any question as to how much Wall Street likes GW Pharmaceuticals, just look at all of the analysts. Six out of six equity analysts covering GWPH have buy ratings on the stock.
4 Broker-Dealers that Raised Capital for GW Pharma
As credited in the GW Pharmaceuticals press release, “Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC, J.P. Morgan and Cowen and Company, LLC acted as joint book-running managers for the offering.”
Goldman Sachs & Co. LLC, the New York domiciled subsidiary of The Goldman Sachs Group, Inc. (NYSE:GS), “provides services that include securities brokerage, dealership, and underwriting; investment banking; commodity trading; and investment consulting,” according to the company’s profile in Bloomberg.
Morgan Stanley & Co. LLC, a subsidiary of Morgan Stanley & Co. Inc. (NYSE:MS), is an “investment banking firm that offers financial advisory and security brokerage services,” according to the company’s profile in Bloomberg.
J.P. Morgan Chase & Co. (NYSE:JPM), is a self-described “global financial services firm with assets of $2.6 trillion and operations worldwide.” Offering financial services ranging from investment banking to asset management, J.P. Morgan is the largest bank in the United States.
Cowen and Company, LLC, the smallest firm on this list, is a subsidiary of Cowen Inc. (NASDAQ:COWN). Despite being small in terms of assets relative to the banking behemoths above, Cowen has the largest presence in the cannabis industry by far thanks to Vivien Azer, Cowen’s managing director and senior research analyst specializing in the beverage, tobacco, and cannabis sectors. Not only is she the most accurate analyst in the cannabis sector, she’s also ranked #63 overall for accuracy and returns out of 4,882 Wall Street analysts tracked on TipRanks.
As the cannabis industry continues to heat up, the deals are only getting larger. Given the legalization trend and overall destigmatization of the industry, more and more major investment banks will start getting involved in the space. Until then, the smaller boutique banks that have been making a killing in the cannabis space will continue to do so.
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