CANNABIS CULTURE – Cilo Cybn, a South African medical cannabis startup flopped with their first attempt to become Africa’s first cannabis Special Acquisition Vehicle (SPAC). Now, they are trying again and observers want to know what has changed.
The Goa last year was to raise $116mn. Cilo raised less than 1% of that, $1.078mn, leading Gabriel Theron, the startup’s founder to admit, “We have determined it is in the best interest of the company to focus on its growth initiatives, and thus to postpone listing to a later date.”
In April 2023, it is trying again after reportedly finding a Malaysian backer, the firm ALPS Global Holding Bhd. As a majority shareholder, ALPS Global will drive Cilo Cybn’s SPAC, and attempt a listing on the Johannesburg Alternative Securities Exchange in mid-2023.
“Cilo Cybn second attempt to create a SPAC can be doomed to failure again if the domestic investors don’t come to party,” Dikeledi Matla chairperson of the Soweto Cannabis Alliance Forum, a South African lobby for Black cannabis cultivators, says, arguing that “It’s too soon for Cilo Cybn to try again.”
Though Cilo Cybn has found a Malaysian financier who looks significantly well-resourced, the most important factor is for South Africa’s domestic investors, large corporates and small, to snap up shares in Cilo Cybn, and thus strengthen its liquidity or working capital when it hopefully lists, adds Matla.
“On the Johannesburg Stocks Exchange and other securities exchange, there is still enormous stigma towards cannabis investments vehicles. Capital is frightened by the legal ambiguities surrounding cannabis in South Africa,” says Matla, citing the example of another high-profile South African cannabis corporation, Labat Africa whose stock took a catastrophic fall in 2022 and ended the year at 10 South African cents after debuting at 30 cents.
Cilo Cybn is ‘too ambitious’ and ‘poorly defined’ in terms of its core cannabis strategy (it hypes itself as a cannabis cultivator and dabble in cannabis mushrooms psychedelics ) and this probably puts off some potential investors, feels Sicelo Nyoka, now an independent cannabis markets analyst and former economist at the South Africa industry and commerce ministry where he used to assess finance profiles of foreign cannabis corporation applying for business licenses in South Africa.
“It would be better if Cilo Cybn defines itself clearly whether it’s a straight cannabis cultivation to export player or a cannabis bio-pharmaceutical startup wishing to develop medicines for commercial sale. Now it’s unclear and investors don’t like those grey, undefined ambitions,” Nyoka says.
Last month on 19 April, ALPS Global chief executive officer and founder, Tham Seng Kong, defined its ambition in setting up Cilo Cybn for another SPAC listing as: “Our interest in Cilo Cybin is the potential for future drug development that can be produced for diseases such as Parkinson’s. Cannabis is only the beginning.”
For Nyoka, the market analyst, that sounds like “more confusion to potential shareholders. Is Cilo Cybn an experimental cannabis drug-maker or cannabis cultivator?”
