Is Compass Cannabis your next ASX pot stock?

Special Report: Compass Cannabis is about to wrap up a successful equity raising via Birchal, and already has an eye firmly on the ASX.

Canadian import Compass Cannabis is already looking to its future as an ASX play, after collecting well over the minimum number of investors needed for a listing in its inaugural Australian capital raise.

The company launched a public equity crowdfunding offer in early July via Birchal and is looking to raise up to $2m.

Compass Cannabis operates clinics, with two in NSW and five in Canada, and has a partnership with Medipharm Labs to supply white labelled products in Australia and with Medigrowth in New Zealand.

The Birchal raise closes on Thursday, and has already attracted over 400 investors. An ASX IPO requires a minimum of 300.

Brokers sniffing around for an IPO

Compass Cannabis president Dave Martyn says the have always considered an Australian IPO to be a key milestone for the company.

The initial equity crowdfund was a way of testing investor appetite for that, and for cannabis companies in Australia.

“Generally the response from investors has been what we expected,” he told Stockhead.

“There is a lot of surprise about how much the industry has grown in the last 18 months and we’ve caught a lot of people off guard, who have started to take a second look at medical marijuana in Australia.”

Compass Cannabis has also caught the eye of the IPO industry — the lawyers, brokers and technical writers who help companies prepare for listing.

These groups are betting on a resurgence of interest and therefore cannabis plays on the market in the coming 12 months.

“We’ve fielded a lot of interest from third parties, the people who would be the next step to an ASX listing,” Martyn said.

“The feedback we’ve heard is that there’s been renewed interest in cannabis in just the last three months.”

Australia is the next Canada

Martyn has been scoping out Australia since 2018 and he believes Australia is on the same trajectory as Canada for the widespread use, and therefore sales, of medical marijuana — except much, much faster.

“I believe Australia and New Zealand are the best international markets outside North America in terms of growth. Both have flown under the radar because of COVID-19 and because they’re still early stage, but the near-term catalysts are here,” he said.

Patient access numbers have set new monthly records in nine of the past 13 months and May was the first month with over 4000 authorisations for use. For perspective, in all of 2017, the year after legalisation, there were around 250 approvals given for the year.

“We don’t see that number slowing. It’s already exceeding the early Canadian patient figures which were 7900 in 2014, which was 13 years after the first medical cannabis framework was put in place there,” Martyn said.

After a blockbuster year in 2017 for pot stocks, investor interest waned from early 2018 until now as companies set in for the hard work of building an industry.

That hard work is paying off, with record numbers of prescriptions being made in the last three months and the government predicting prescription numbers to touch 70,000 across more than 30,000 patients, up from just 457 patients in 2017.

This article was developed in collaboration with Compass Cannabis, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.