More MS news articles for Aug 2001

Analysts complain of cannabis high,3604,532188,00.html

Saturday August 4, 2001
Andrew Clark
The Guardian

The recent flotation of GW Pharmaceuticals, Britain's leading legal cannabis grower, has come under attack from fund managers who believe the offering was over-hyped and excessively priced.

Shares in GW, which is developing a cannabis-based treatment for multiple sclerosis, have collapsed by 40% in the five weeks since the company joined the stock market.

GW's advisers blame the fall on misinterpretation by the market of an anti-cannabis report in the British Medical Journal and growing support for legalising the drug for recreational use.

Analysts and institutional investors have complained that the £175m price tag for the offering was too high. In a private fundraising late last year, the company was valued at less than £50m.

There has been criticism that 30% of the shares were retained in the flotation by wealthy individuals who were not "locked in". Institutions were assured that tax advantages would prevent these people from selling, but some of them were encouraged to do so by the unexpectedly high flotation price.

One fund manager said: "There was a private equity placing last year in which all these people bought in at a quarter of the price. Of course they were tempted to sell when it floated."

A biotech analyst said: "People thought cannabis was lovely and easy to understand, and there was an awful lot of hearsay to suggest it would work. It got off at a ridiculous price - it was over-selling, and people won't be swept along by this sort of thing again."

Another fund manager suggested the flotation was aimed at less experienced biotech investors: "Rather than place it with the more savvy institutions, they went for the less sophisticated ones with less exposure to this industry."

Andrew Richmond of GW's broker, Collins Stewart, rejected the criticisms: "If you compare the shareholder list with other biotech companies, there's a lot of commonality in terms of major blue-chip institutions.

"We did not over-hype the flotation; we went through our normal marketing programme for this type of company."

Guardian Unlimited © Guardian Newspapers Limited 2001