All You Need To Know About An Upcoming Pot Stock IPO - Cronos Australia

  • Nov 16, 2018 AEDT
  • Team Kalkine
All You Need To Know About An Upcoming Pot Stock IPO - Cronos Australia

Cronos Group Inc. came up with the announcement of the launch of Cronos Australia Pty Ltd. (Cronos Australia) on February 2018. Established under a 50:50 joint venture agreement between the two leading global cannabis producers, Cronos has wide set of technological and intellectual property assets along with advanced manufacturing and cultivation techniques and access to wide distribution channels. 

The joint venture deed is done between an Australian based private equity firm, NewSouthern Capital and the Cronos Group. The company (Cronos Australia) with its close association with the government is working rigorously towards its commitment to provide Australian patients with the highest quality medicinal cannabis products as well as supply to export markets globally.

The company has already received a Medicinal Cannabis License (cultivation and production), Cannabis Research License and a Manufacture License from the Australian Federal health Department’s office of Drug Control. Cronos Australia is planning to produce cannabis from its local cultivation and manufacturing facility located near Daylesford, Victoria and plans to import cannabis from Canada at present. The 120-acre site at Daylesford Victoria aims at producing 22 tonnes of cannabis annually, will have its construction to be completed by the end of the 2019 financial year and will have the harvesting to be started by 2020.

In lieu of all these licenses, Cronos Australia is planning to come with its IPO (initial public offering) in Australia.

The company expects to raise about $50m in fresh funds for the IPO. As per various media reports, the deal would reflect the market cap of the company to be ranging in between $180m to $200m and the indicative enterprise value to be around $130m-$150m. The company has allocated funds of approximately $35.2 million towards the cultivation and manufacturing facility.

As per the recent declaration made to the investors approximately 36%-37.5% stake in Cronos Australia will be contributed by Cronos Global and exactly the same amount of stake (36%-37.5%) will be held by an Australian entity, NewSouthern Investment. While the remaining stake of around (25%-28%) depending on the IPO price will be offered to the new investors.

The group has cannabis production capacity of 6.65 tonnes a year and has other nine facilities under construction that will raise the capacity to 110.5 tonnes. Given current and anticipated market opportunities, Cronos is exploring and identifying alternative facility designs that may include an expansion to the previously announced plans for a 20,000 sq. ft purpose-built indoor facility.

At present, key companies that are growing cannabis in Australia include Cann Group, Medifarm and the unlisted company, Little Green pharma. Meanwhile, ASX: THC expects to get final permit to start growing cannabis by next month.

IPO is catching interest from many investors and one strong reason of such interest lies with connection of the IPO with Canadas's Cronos Group, which has a market cap of around $2.4 billion and was the first cannabis company that got listed on the Nasdaq.

Cronos Australia with its plan to come up with IPO in Australia can make the company as one of the leading ASX pot stocks like Cann.


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