Cannasouth breaks listing drought

Hamesh Sharma

In my last article, I discussed how Xero de-listing from the NZX was a sad day for the local market. So, you would think that when the first IPO in 2-years for the NZX listed the other day it would be a cause for celebration – the last new listing being Oceania Healthcare in May 2017 has meant a long wait. Unfortunately, for NZX investors we are far from impressed by the latest listing on the market, medicinal cannabis company Cannasouth (CBD).

Vodafone had been tabled as the next listing on the market but fell through given it has been bought by Infratil & Brookfield. Vodafone, being a well-known business could have been great in terms of adding much needed liquidity to the market, compared to Cannasouth which we see as a highly speculative investment given it is a pre-revenue and loss-making business.

The NZX has been struggling, with a number of de-listings of quality companies over the past couple of years including Xero, Nuplex, Diligent, and Trade Me to name a few. Has the local market operator become too desperate in its hunt to grow the NZ stock market?

Shares in CBD are down -36% from their IPO price of 50 cents a share. This is not surprising as CBD is an extremely speculative investment which has not generated a dollar of revenue. Further, with the business still trading at a market capitalisation of $32 million the valuation looks eye-watering.