Cellular Goods (LSE:CBX) launched on the London Stock Exchange last week after a very successful initial public offering (IPO). It’s an early stage cannabis company potentially arriving at an opportune time. Fellow cannabis stocks Kanabo and MXC Pharmaceuticals also launched in London in recent weeks to an explosive response.
Cellular Goods is a public facing cannabinoid company backed by David Beckham. It launched on Friday at 19p a share, but has since fallen to 12p. In its pre-market placing it was oversubscribed by 13 times. I think this is due to rising enthusiasm and excitement in the growing cannabis arena, along with Beckham’s influence.
A £1bn industry
The cannabinoid field is massive and growing rapidly. Cannabidiol (CBD) is one type of cannabinoid gaining popularity as it’s used to treat a multitude of health conditions. This includes inflammation and pain relief as well as mental health issues and sleep. While we derive some CBD products directly from the cannabis plant, others are synthetically created in a lab. Cellular Goods intends to make synthetic CBD products focusing on skincare and athletic recovery.
The Centre for Medicinal Cannabis has found that 1,300,000 British consumers are already using CBD products. It also estimates that the market, which is showing double-digit growth, could be worth almost £1bn a year by 2025.
However, the company hasn’t yet produced any products, so its investors are purely pinning their hopes on the potential for success. It also doesn’t plan to announce any products before September, which is a long time for shareholders to patiently wait.
Synthetic cannabinoids
The company claims that making the products in a lab affords a level of scientific precision that avoids pesticides and a more sustainable product. But on a cellular level, they’re bio-identical to plant-based cannabinoids.
I think the future success of this company will come down to the quality of its products and the success of its marketing campaign. Beckham owns 5% of the company through his investment company, DB Ventures. His athletic background and high profile might help propel the brand if he’s involved in the marketing, but I would imagine that’s unlikely.
Should I buy shares in Cellular Goods?
At the moment, I’ve no plans to invest in Cellular Goods. I think it’s too early to gauge how the company will progress. And I think there’s already quite a lot of competition out there. Even FTSE 100 heavyweight British American Tobacco is making inroads into the CBD market.
It’s well known that the health, beauty, and sports supplements sector is thoroughly saturated. I understand the appeal of CBD products and many people advocate they’re a great help for painful conditions such as arthritis. Therefore, I think it certainly has a chance at success. But it seems quite a risky investment at this stage. And I think there are plenty of other exciting stocks I’d prefer to add to my portfolio.
