Medical marijuana company Phytotech Medical is set to be the year’s first listing in Western Australia, after taking special steps to deal with last-minute legal concerns by the ASX and keen demand from investors.
Medical marijuana company Phytotech Medical is set to be the year’s first listing in Western Australia, after taking special steps to deal with last-minute legal concerns by the ASX and keen demand from investors.
The company has agreed to accept $932,000 of oversubscriptions, lifting the total value of its initial public offering to $5.9 million.
The demand from investors was evidently not affected by the concerns of regulators over the legality of Phytotech’s business.
Managing director Boaz Wachtel has 25 years’ experience in the medical cannabis industry and heads the Phytotech business with executive director Ross Smith, who is known to WA investors through his involvement in companies such as Colonial Brewing Co, Request DSL, and Jabiru Metals.
Both executives are based in Israel, which will be the hub of the company’s operations, along with sites in California and Uruguay, where it is looking to grow marijuana.
The company was originally scheduled to list on the ASX last month but was delayed until this month by queries over the legality of its business.
“The ASX required us to get Israeli and Australian criminal barristers’ opinions on what we are proposing to do,” Mr Smith told Business News.
“Interestingly, Australian Commonwealth law goes beyond our borders so we needed sign off.
“We knew that we are okay but it is good to know that what we are undertaking is legal.”
Mr Smith said the company’s lead manager and underwriter, BBY, had $15 million in commitments one week after launching the IPO last month.
“We had to accept oversubscriptions because our early seed backers wanted their full allocation of stock at the expense of the general public,” he said.
“So we as a board picked 265 public names and gave them small allocations.”
Mr Smith said most of the demand came from sophisticated investors and the general public in Australia.
The keen interest in Phytotech contrasts with the lacklustre market for IPOs during the past year, with only 10 WA-related IPOs completed in 2014.
Next week’s print edition of Business News will have a detailed review of 2014 corporate finance activity, looking at trends in IPOs along with the growing number of backdoor listings.
Phytotech’s main focus will be the development of delivery systems for medical cannabis, such as disposable vaporisers and oral capsules, in the markets of North America, Europe and Israel.
It also plans to finalise feasibility studies on growing marijuana in California and Uruguay, to support development of a vertically integrated business model.
Mr Smith is championing legal reforms in Australia and other places that do not allow medical use of marijuana.
“I have seen first-hand the remarkable medical remedies here in Israel, with sick people with cancer,” Mr Smith said.
“Why can’t we as a society be adult enough to accept that MC works and it helps sick people?
“Cancer sufferers undergoing chemotherapy have extreme nausea and loss of appetite, when they need this energy to fight the fight of their lives.
“MC stops the nausea and gives them appetite and a quality of life they didn’t have before.
“We are moving to take things another step by funding the formulation of MC into mainstream pharmaceutical delivery systems.”
WA Labor leader Mark McGowan said last July the medical use of marijuana should be legalised, however Health Minister Kim Hames opposed the idea.
