Cannasouth CEO defends initial offer price as shares slide into first day of NZX

Cannasouth's general manager, Mark Lucas, defended the stock's price, which is currently quoted on the NZX, claiming that the market would ultimately decide on its value.

Shares of the research-based medical cannabis start-up, issued at 50 ° C, were first traded on the NZX at 51 ° C, then quickly fell to 40 cents, a decline of 20 %.

At 50 ° C, some commentators said the stock was too expensive.

Just before Cannasouth went "live" on the NZX, Lucas acknowledged that the program's pricing had been put in the spotlight.

"Yes, there was controversy or comment around the question price, "Lucas said.

"Evaluations are very subjective things, if you believe in a free market, it's the market that determines the value," he told the Herald.

"We have done our best to price where we think it is justified and in terms of overseas values," he said.

"There are different ways to value these companies and the market will finally tell us whether we have this right or not," he said.

"It is clearly a start – up company and the regulations have not yet been defined so there is a lot of uncertainty, but there is also a lot of d & # 39; opportunities in this emerging sector in the world, "he said.

"We have to be aware of the risks of regulation and competition, but we also have an opportunity at the end of the day," he said.

In the future, Lucas said the company plans to implement some of its plans as soon as a clearer picture of the regulations emerges.

The $ 10 million fundraiser – the first on NZX for about two years – attracted 1,400 investors.

The initial public offerings related to cannabis have been popular abroad and two or three others are expected to arrive on the local market before the end of the year.

Cannasouth plans to use the funds raised for research and development, a new commercial processing facility, more staff and increased working capital.

In its bid documents, the Waikato-based company warned that there could be delays in the development of the new framework or that the medical conditions for which medical cannabis may be prescribed could be so narrow that they would not promote profitability.

Independent research firm Shareclarity stated that Cannasouth had no income, no significant assets, and no products on the market or in development.

"In summary, Cannasouth is a newly formed company that appears costly without any certainty of becoming an operating business," said Shareclarity in a research note.

Despite the boom in the retail market in recent years, the NZX is in the midst of drought.

Lucas explained that the company's willingness to follow the publicly traded route was based on its desire to be well capitalized, while offering investors a way out.

Along with co-founder Nic Foreman, he has been involved in growing and researching industrial hemp since 2002, when he was awarded one of New Zealand's first crop licenses.

In February, Cannasouth obtained new licenses from the Department of Health to import, grow and research medicinal cannabis.

This is in addition to its existing controlled drug possession license, which allows it to extract, process and manufacture cannabis products for scientific research.

The bill to amend the law on drug abuse (medicinal cannabis) was adopted at third reading last December, laying the foundation for a cannabis industry for medical purposes.

In addition to giving terminally ill patients a defense against the use of illegal cannabis products, the bill requires the government to establish a regulatory framework for the medical cannabis industry in Canada. 39, here a year. local industry will take.