Canada’s heavily saturated cannabis market is prompting Canuck grower NextLeaf Solutions to take a look at Australia.
NextLeaf would be the second Canadian born-and-bred cannabis company to list in Australia.
NextLeaf is looking to raise $7 million with a market cap of $18-19 million, and float around the end of February.
Local advisor Hunter Capital plans to drop off a prospectus with the ASX this week.
The first Canadian pot stock to list in Australia was Roto-Gro International (ASX:RGI) which sells growing equipment.
NextLeaf plans to apply for all of the available Australian manufacturing and production licences after it lists.
No backdoor for TSX
The company tried to backdoor list onto the Canadian TSX market via a company called Rojo Resources last year — but the deal was cancelled in September.
Hunter Capital managing director Stephen Silver says NextLeaf was keen on Australia because Canadian cannabis was a saturated market.
It’s also frothy. A market index by The Marijuana Index of the top 24 listed companies in Canada was up 8 per cent overnight to 1,010.67 points.
Tech, not agribusiness
NextLeaf combines growing operations with oil extraction technology.
“The key differential is that Nextleaf is a patented extraction technology to produce CBD [cannabidiol] and THC [tetrahydrocannabinol] oils, as opposed to the other cannabis companies,” Mr Silver told Stockhead.
“This is a technology business as much as a cannabis business,” he said.
“We believe the higher margin business case will be derived from cannabis extraction rather than simply selling raw cannabis material.”
Cannabis companies get high on the ASX
Canada’s two biggest cannabis companies, Canopy Growth Corporation and Aurora Cannabis, have a foothold in Australia with ownership stakes in the two biggest local growers, Auscann (ASX:AC8) and Cann Group (ASX:CAN) respectively.
Already the ASX has proved fertile ground for Israeli stocks.
Botanix (ASX:BOT), Creso Pharma (ASX:CPH), eSense-Lab (ASX:ESE) and MGC Pharmaceuticals (ASX:MXC) have all listed in Australia.
Others, such as MMJ Phytotech (ASX:MMJ) and the newest cannabis listing Elixinol (ASX:EXL), have strong ties with overseas subsidiaries.
Stockhead is seeking comment from NextLeaf.