San Diego’s Hempacco, a maker of nicotine-free hemp cigarettes, managed to pull off something that few local companies have done this year — price an initial public stock offering.
The 15-employee firm, which manufactures hemp smokables, flavored rolling paper and other products at a 53,000-square-foot production facility in Otay Mesa, raised $6 million on Aug. 29, selling 1 million shares.
Hempacco’s stock opened at $6 and jumped to $7.28 on its first day of trading. But the shares have sold off since, closing Wednesday at $3.48 on the Nasdaq exchange.
The company originally sought to sell 3 million shares and raise $15 million. But volatile stock markets have spooked IPO investors. Hempacco decided to go ahead with a smaller stock sale now, with the possibility of a secondary offering later if conditions improve, said Chief Executive Sandro Piancone.
This year’s IPO drought has been dramatic. It comes on the heels of two strong years where the spigot for companies going public was wide open.
Only two tiny San Diego companies have priced IPOs in 2022 — Hempacco and Belite Bio, which went public in April. They raised a combined total of $42 million. In both cases, parent companies maintained majority shareholder voting control of the firms after their IPOs.
Last year, 14 San Diego companies went public, corralling $4.1 billion, based on data from Connect San Diego and IPOScoop.com, an industry research firm.
Nationally, it’s a similar story. The number of IPOs on U.S. stock exchanges is down 75 percent through June 30, with just 54 companies going public, according to the EY Global Trends Report.
Proceeds from these public offerings are down 94 percent to just $4.75 billion, said EY, formerly Ernst & Young.
Founded in 2019, Hempacco makes and sells hemp-based smokables as alternatives to traditional cigarettes — both under its own flagship brand, The Real Stuff, as well as under a white label for other companies. Its products are free of THC — the compound in marijuana that makes people feel high, said Piancone.
The company has trademarked the phrase “Disrupting Tobacco.” Hempacco’s in-house brands are sold in 200 locations in the San Diego region. It recently launched flavored hemp rolling papers, and it has pending partnerships with rapper Rick Ross and comedians Cheech & Chong.
But it’s a small operation. While revenue grew to more than 200 percent to $1.19 million last year, the company racked up a $1.9 million loss. Its majority owner is Green Globe International, which is involved in cannabidiol (CBD) edible gummies and other products.