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Cannabis Referendum see's retail disparity take forefront

With the referendum preliminary results coming in, marginally in favor of the NO vote in regard to legalization and control of cannabis.

The result was 53.1 % against and 46.1 % for. With such a tight preliminary result, the nearly 500,000 special votes still to count will come in to effect and could change the overall outcome. But the market waits for no one.

Both Rua Bioscience and Cannsouth Ltd, two recent listings and seemingly darlings of retail investors, took a hit on the back of the results, showing disparity between what the companies actually do and what investors had hoped.

While neither company has made public statements in regard to production of non-medicinal cannabis, clearly the market had some level of hope for a retail market for the producers. Neither company is out of the competition, as medicinal cannabis is legal to grow. This will allow the companies to continue to operate in this space.

If we dive deeper into the two companies, Rua has two commercial facilities here in New Zealand and a sales agreement with German based Nimbus Health GmbH, it listed at 50 cents a share and saw immediate favor getting to as high as 70 cents. Initial disclosure has the business as a loss maker for 2 years.

Cannasouth (CBD.NZX), which was previously as high as $1.21 in August, has a genuine production capability and has made some strategic investments in production facilities, a white label product with Australian Medipharms lab a subsidiary of Canadian Listing (LABS.TSX 0.81 CAD). While CBD is the clear leader its share price has shed almost 50% in the last 90 Days.

Our advisors continue to monitor these stocks as a long-term growth opportunity, however given the nature and life stage of these businesses view them at the top end of our risk matrix, consider seeking advice before any investment.

October Market Closes

Disclaimer: This publication has been prepared for your general information. While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken for any errors or omissions. This publication does not constitute financial or insurance product advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. Disclosure statements relating to the financial advisers associated with this newsletter are available on request and free of charge.

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