Immediately after the flotation, shares in GW went into freefall as investors dumped stock. The price has dropped 44%, triggering accusations that the public offering was poorly handled.

GW is Britain's biggest legal grower of cannabis, with more than 40,000 plants under guard at a secret location in the south of England. Although its flotation was six times over-subscribed, the firm has received a mauling in the City since. One analyst described GW as "an incredibly over-priced greenhouse".

Among GW's biggest backers was Colin Blackbourn, a trader at Shore Capital who is known in the City as the Black Prince for his ability to pick small investments. Mr Blackbourn invested £147,000 in GW early last year, then saw his shares valued at £765,000 on flotation.

John Francome, winner of seven National Hunt titles, was another beneficiary, investing about £20,000 in GW prior to flotation. Now a television commentator, he was introduced to GW by a young jockey whose family had an interest in the business.

'It's cheap at the moment'

"I wouldn't know a drug if it was sitting in front of me," Mr Francome says. "But I think GW's a great idea. If you can help people who are ill, that's a good thing."

Unusually, GW had almost no institutional backing before going public. Most of the shares were held by individuals. David Dundas, best known for his 1970s hit Jeans On, had 39,984 shares on flotation, worth £72,000. He paid less than £25,000 for the stock in a private fundraising by GW last November.

The son of the Marquess of Zetland, Dundas's work includes composing the four-note jingle used to introduce Channel Four programmes. He says: "I just heard through a friend of the things GW was doing. I liked the company and, long term, I think it's going to be a good one."

Under licence from the Home Office, GW began trials of a cannabis-based mouthspray last year. The company's admirers say that if clinical trials are successful the commercial potential could be vast. Garry Waanders, an analyst at stockbroker Peel, Hunt, believes sales of GW's cannabis-based treatment for multiple sclerosis could reach £250m by 2004, and he values the business at £400m. "I think it's very cheap at the moment."

But a recent move towards wholesale decriminalisation of cannabis has damaged the investment case, raising the possibility that patients could simply grow their own. GW rejects this, insisting that smoking cannabis is much less effective than its purified form of cannabinoids, the active ingredient inside the drug.

GW's founder, former hospital doctor Geoffrey Guy, has lobbied the government hard to permit prescriptions of cannabis-based drugs. He says the Home Office has pledged that if GW's clinical trials are successful ministers will reschedule cannabis to permit its use in pharmaceuticals.

Other private backers include Lady Angela Chadwyck-Healey, a noted art collector. She paid £98,000 in spring 2000 for shares which were valued in June's flotation at £509,000.

Philip Robson, a psychiatrist at Chilton Clinic, Oxford, is on the shareholder register alongside his colleague George Hibbert. Dr Robson, an advocate of decriminalisation, is the author of "Forbidden drugs: understanding drugs and why people take them", a respected work on the subject. Another investor is Arnold Cragg of market research firm Cragg Ross Dawson, which analyses the government's anti-drugs messages.

City names include David and Guy Mace, the brothers who used to run leisure firm Vardon, which owned the London Dungeon and the Sea Life centre.

Venture capitalists Peter Mountford and Adrian Bradshaw of Bradmount Investments, which backed the Aim-listed firm Internet Direct, are big personal backers. Mr Mountford and his family had 480,000 shares on flotation, worth £873,000, while Mr Bradshaw had 240,000 shares, worth £435,000. They bought their stakes for £300,000 and £150,000 respectively in November.

Stephen Noar, the entrepreneur who purchased Geoffrey Robinson's Lutyens mansion in Hampshire for about £5m last year, was another investor in GW's November fundraising. His family paid £525,000 for shares which were valued on flotation eight months later at £1.5m.

The huge paper profits made by these pre-float investors will frustrate those who bought shares in the public offering, only to see an immediate slump in the price.

GW blames misinterpretation of a report in the British Medical Journal which questioned the effectiveness of cannabis in treating pain. The company says this had few implications for its cannabinoids.

Others suggest that the price has fallen because private investors were not locked in after flotation. There has been criticism, too, of the small number of shares handed out to each institutional investor on flotation by broker Collins Stewart. Some fund managers, it is alleged, were left with such small parcels that they decided the equity was not worth hanging on to.

One analyst said: "People were promised that it would be over-subscribed, and it would double on its first day. That's the only reason why a lot of them took it."

Jonathan Kwok, a biotechnology analyst at Old Mutual Securities, said: "The shares were definitely overpriced when the company went to the market."

GW's management declined to discuss the flotation yesterday. A spokesman said the big profits made by private investors were "not atypical of pre-float finance", and only a small number of early backers had sold after the offering."Clearly, the performance of the stock post-flotation has been disappointing and the company shares that disappointment."

Andrew Richmond of Collins Stewart rejects the idea that the flotation was hyped, maintaining that it was handled no differently from any other offering.

GW's shares rose 0.5p to 103.5p yesterday, against a flotation price of 182p. The share price has been sluggish despite news this week that the firm has begun trials of its cannabis spray in Canada, where medicinal use of the drug has just been legalised. Chief executive Geoffrey Guy has little to smile about following the share price fall: the value of his personal stake has dropped from £47m to £26m.

On September 7, the firm expects to announce detailed results of its latest clinical trials. As far as investors are concerned, they had better be stunningly good.

Note: Cannabis grower made fortunes for early supporters but others feel let down.

Source: Guardian Unlimited, The (UK)
Author: Andrew Clark, The Guardian
Published: Thursday, August 16, 2001
Copyright: 2001 Guardian Newspapers Limited
Contact: letters@guardian.co.uk
Website: http://www.guardian.co.uk/

Related Articles & Web Site:

UK Medicinal Cannabis Project
http://www.medicinal-cannabis.org/

Area Doctor Tests Marijuana Spray
http://cannabisnews.com/news/thread10615.shtml

High Hopes for GW's Medicinal Cannabis
http://cannabisnews.com/news/thread10254.shtml

Seriously though,,I'm quite certain you're right about this companys future..
....but my finances are rather enemic right now,,,I can barely afford to pay attention.

Firstly, the GW Pharmaceuticals "glasshouse" currently contains 11,000 cannabis plants, with plans for many more.

Investors are getting far more than merely a fancy grow operation. It is, rather, a state-of-the-art, totally climate controlled facility. The company has access to the finest cannabis genetics as developed over 20 years by HortaPharm in the Netherlands. They furthermore have developed a team of the premier cannabis geneticist on the planet, with expert biochemists and botanists to ensure that any aspect of cannabis chemistry can be manipulated toward the production of certain components of medical importance. There is no recombinant DNA nonsense there. All this is managed with traditional and modern botanical breeding techniques with horticulture that is 100% organic in real compost with the finest available integrated pest management (IPM).

The cannabis product is then processed with state-of-the-art liquid carbon dioxide extraction to ensure that all the desired cannabinoids, and terpenoids are retained for full medical effect without addition of any potential toxic solvents.

As if that were not enough, the true genius behind this company revolves around its unique set of delivery techniques that currently include a sublingual spray, sublingual tablet, and will soon include an innovative nebulizer/vaporizer technique. All are equipped with solid-state devices that monitor use for the benefit of patient and clinician to help ensure that optimal dosages with minimal side-effects are obtained. These patents are extremely applicable to drug delivery of other products and represent a potentially huge market in their own right. The GW Pharmaceuticals Internet website can be viewed at:
http://www.gwpharm.com

Full details will be published in a couple of months in the Journal of Cannabis Therapuetics 1(3-4) (Haworth Press)in a long article by Drs. Whittle, Robson and Guy.

On September 7 in at the American Academy of Pain Management meeting in Arlington, VA (http://www.aapainmanage.org/AAPM/Confrnce/conf2001.html), Dr. Geoffrey Guy will present a keynote address after a day-long symposium on cannabis in pain management to announce the results of the clinical program to date. Those results have been very impressive in a large variety of clinical diseases including multiple sclerosis, rheumatoid arthritis, chronic pain states, etc.