Medicinal cannabis companies help drive Australian IPO listings to outperform the ASX200

Photo: Robert Gauthier/Los Angeles Times/Getty Images

IPOs returned an average of 18.3% in the March quarter, outperforming the ASX200 index by 14.8%, according to the OnMarket 2017 First Quarter IPO Report.

Over the quarter, there were 26 listings raising a combined $232.3 million compared to 12 with a combined $86.3 million in the same three months last year.

Materials floats returned a steady 4.5% on the first day of listing and an average 15.7% gain over the three months.

The standout performer over the three months was Ardea Resources returning 160% from its February 9 listing to March 31.

“The rush of mining companies to float on the ASX reflects a significant turnaround from last year when few miners floated,” says Tim Eisenhauer, managing director of OnMarket BookBuilds.

“There is now a greater investor appetite for mining sector investment given higher commodity prices and greater confidence overall in share markets.”

The mining IPOs included Kalamazoo Resources, Freehill Mining, Davenport Resources, Blackstone Minerals, Ardea Resources, Matador Mining and Lithium Consolidated Mineral Exploration.

The largest five listings were Fat Prophets Global Contrarian Fund, Visioneering Technologies, Velocity Property Group, Bigtincan Holdings, and Eildon Capital. These five listings together raised $119.5 million, or more than half total funds raised during the quarter.

Two out of the top three performers — eSense-Lab and Roto-Gro International — have ties to the emerging medicinal cannabis sector, as this chart shows:

Source: OnMarket 2017 First Quarter IPO Report.

eSense-Lab was up 140% and Roto-Gro International 105%.

Shares in ASX-listed companies with a connection to medical cannabis have been on a tear recently.

Among them MGC Pharmaceuticals last month raised $10 million to accelerate development of medical cannabis products and seek acquisitions.

MMJ Phytotech went from 18 cents to 75 cents a share and is currently trading at 68.5 cents. Auscann Group went from 21 cents to 83 cents and is now trading at 80 cents.

Stemcell United, which announced it was looking at medical cannabis opportunities, is currently trading at 17 cents, up from a low of 1.3 cents, after briefly hitting $1.

Riding the wave of pot stocks is the Hydroponics Company Limited (THC) which plans to list on the ASX on April 20. OnMarket, the online IPO retail bidding platform, had to close bidding only two hours after opening the IPO due to overwhelming demand.

“THC will follow several other companies listing on the ASX in recent times after it became legal to cultivate, produce and manufacture medicinal cannabis products in Australia in October last year,” says Eisenhauer.

“As a result, we may see more pot stocks seeking listings on the ASX this year, following in the path of THC.”

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