The last part of the Cannabis Fund series discusses investment routes and publicity before wrapping up on the topic.
Clearing investment pathways
The most immediate priority for Hong Kong is to reform laws and regulations to ensure that capital flows can be attracted, retained, and managed. Such reform would move to clear any legal bottlenecks, which could put investors off.
Fund managers are acutely aware of anything that may impede the flow of capital. They want to know if laws link the investments to the legality of company activity within Hong Kong, or if regulatory approval in the country in which an investment is based sufficient. Managers want to be encouraged to invest, rather than have to endure constant warnings to be careful from regulators. Intelligently crafted laws with an eye on improving capital flows can lead to more investment and beneficial economic activity.
This applies right through the cycle of investment. From start-up to public listing or a sale through M&A activity, everything must be pro-cannabis, pro-investment, and most importantly pro-investor. This requires a dual approach, which both facilitates and protects transactions.
For example, a public listing has been one of the key ways that companies have either secured an exit or further generated liquidity in Canada, the US and Australia. But this approach has not been without its problems. It has been encouraged but at the same time this has led to volatility as companies have moved towards an IPO before they have been ready.
By contrast, in the UK, the FTSE and AIM have imposed informal restrictions that have made listing an overly arduous process. Arguably this has been too much of a swing in the opposite direction and this has reduced opportunity. The sweet spot for Hong Kong is somewhere in between:encouraging companies while controlling quality and avoiding premature listings of unready ventures.
The prize for getting this balance right is huge. Internationally, Hong Kong is still the most attractive place for an Asian listing, and cannabis and hemp industry will undoubtedly produce many IPO-worthy entities, along with hundreds, if not thousands of profitable private investments ranging from small start-ups to major private enterprises.
Promotion and publicity
No amount of legislation will have an effect unless the word gets out. Canada has made big strides in the industry because it has become globally known as the centre for cannabis, and part of this is due to promotion by the Canadian Stock Exchange. Equally, Malta, although a tiny island, has invested heavily in advertising and networking through its Malta Enterprise division.
Hong Kong has to spread the word that it is a safe, progressive, investor and founder-friendly place to domicile these ventures. The good news is that Asia is still wide open, and no one else is currently vying for this crown. InvestHK is an effective agency for promoting Hong Kong, but has to be give the green light to promote Hong Kong as a sensible destination for medical cannabis and hemp industries.
This is simply a matter of conceptualising, budgeting, and planning a campaign to create this perception both in the East and in the West, where companies are beginning to think about their Asian market entries.
Tying it all together
None of these suggestions are complex – in fact, the single most important thing Hong Kong needs to do is to make a decision. Does it want to become a hub and an internationally recognised centre of excellence for all things cannabis and hemp, or would it prefer to cede the ground to Asian competitors? After coming to a decision, the political and legislative will to progress or stand still will follow.
The need then is for open debate and for the decision-making process to begin in earnest. The market has already shown it will evolve and grow at a rate that has taken even industry leaders and the most optimistic by surprise.
This process of reaching a consensus about Hong Kong’s place in the sector needs to begin now. The discussion itself should not be rushed, but the need to begin the discussion itself is urgent.
About the Cannabis Fund
The Cannabis Fund is a VC fund dedicated to pioneering medical cannabis and impact investment hemp projects in Europe and Asia. The fund enables investors to take a balanced index on the entire industry, with a basket of diverse opportunities, all forming a complete ecosystem.
We see huge future growth across Asia, especially in China, Japan, India, and South Korea, alongside the progressive jurisdictions such as Thailand. Our aim is to educate and inform serious investors and bring them together with the next generation of Asian cannabis & hemp entrepreneurs.
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