Medical cannabis company Cannasouth in voluntary administration after dispute with investors

Cannasouth director and chief executive Mark Lucas. Photo / Alan Gibson

By RNZ

Listed medicinal cannabis company Cannasouth has gone into voluntary administration after failing to raise much-needed money from investors.

The Waikato-based company warned late last year that it faced a cash-crunch, with job losses looming.

Earlier this week, share trading was halted following a dispute with some investors, with the company warning it needed the money to remain solvent.

In a market announcement late on Thursday, Cannasouth revealed administrators had been appointed.

The company said it came after “careful consideration of the circumstances of the company, including the challenges of securing additional funding and balancing the interest of shareholders and convertible note holders”.

Ben Francis and Garry Whimp of Blacklock Rose had been appointed joint administrators, and now had responsibility for planning for ongoing operations and “meeting cashflow positive results”.

“The administrators will be undertaking a detailed review of the operations of Cannasouth with particular focus on identifying the profitable lines of the company’s products and services,” Cannasouth said.

“When that has been completed the administrators will be seeking financial support from shareholders and note holders to implement that plan.”

The company said the review would take “some time to complete” as the parent company and trading subsidiaries would be scrutinised.

Earlier this month, Cannasouth reported a full-year loss of $8.8 million in the year ended December, but revenue growth of 11 per cent to $956,000.

New Zealand’s medicinal cannabis industry has struggled to achieve profitability since legalisation in 2020.

The sector has partly attributed that to red tape.

Changes to rules announced last year would allow a wider range of plants to be grown and more cannabis products to be exported, but with no Pharmac subsidies and many GPs giving it the cold shoulder, its local product remains uncompetitive with the black market.

Cannasouth listed the NZX in June 2019 at 50c per share.

It hit $1.02 in September 2020 in the build-up to the November 2020 election and the accompanying referendum on cannabis legalisation - which some investors saw as an opportunity for medicinal cannabis firms to expand into the recreational market.

Shares fell sharply after the referendum was lost. They were trading at 9c before this week’s halt for a $32m market cap.

With reporting by Herald staff.