Cronos Australia has made its debut on the ASX under the ticker code CAU after raising AU$20 million from investors in an IPO last month.
The new firm is a 50/50 JV between Cronos Group Inc.
Cronos Australia raised AU$20 million (US$13.8 million) from institutional and sophisticated investors in October after offering 40 million shares at AUD$0.50 each. That gave it an indicative market cap of around AU$64.4 million at the close of the offer.
Cronos is among the five largest cannabis companies in Canada and tobacco giant Altria controls a 45% stake in the business. Its holding in Cronos Australia has gone down to around 31% now that the company has gone public.
Cronos Australia will follow an asset-light model, with plans to outsource the cultivation of medicinal cannabis and manufacturing of products to licensed companies. Those products will include Cronos’ Peace Naturals brand, which is already sold in Canada and Germany.
It aims to use Australia as a regional hub to target the Asia Pacific medicinal cannabis sector. “Our asset-light business model, backing of Cronos Group and Asia-Pacific focus give the Company a unique proposition in our market,” said Rodney Cocks, chief executive at Cronos Australia.
Australia legalized medical cannabis in 2016 and a nascent industry is starting to take shape. The Australian Capital Territory, which houses capital city Canberra, also recently legalized recreational cannabis use, although that decision has proven to be controversial.
Aurora Cannabis has also made inroads into the fledgling Australian cannabis market, which looks likely to be competitive and saturated despite its small size. Yet it has potential to grow significantly in the years ahead and serve as a regional distribution hub.
Cronos Australia is licensed to import and export cannabis products. It is a small venture right now and it is unlikely to have any major impact on Cronos stock, but it is interesting to see the firm spreading its tentacles across the globe.
The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.