New Zealand’s first pot stock Cannasouth (NZX:CBD) has had an inauspicious beginning to its life as a listed entity, with its shares falling 22 per cent.

After raising $NZ10m ($9.5m) at 50c, the stock debuted at 51 cents before dropping off to around 40c.

Cannasouth is researching the medically beneficial attributes of cannabinoid compounds such as cannabidiol (CBD) and tetrahydrocannabinol (THC).

It’s also the first IPO of any kind across the Tasman in two years.

The company raised half of the $NZ10m in an over-subscribed share offer, and the other half in the IPO.

Cannasouth has secured two controlled drug import licences to import dried flower for research, and provide initial cultivars for its growing facility. The company’s investment proposition is based mainly on those regulatory developments, as it’s yet to book any revenue.

The bulk of the funds raised will go towards research and development and a new production facility, as well as working capital requirements and listing costs.

Speaking with Stockhead, about the day-one price action CEO Mark Lucas said the company “can’t control short term trading”.

“We are focused now on building the IP within the business and getting ready for the rollout of the medicinal cannabis access scheme in early 2020,” he said.

The $10m raise “means we are well positioned moving towards the regulations rollout.”

“We currently have an active research cultivation facility licenced for a wide range of medicinal cannabis cultivars. Our extraction and purification lab is licenced and operational so we are actively moving forward with our research programs.”

Lucas holds 27.16m shares in the company post-listing, equivalent to a 27.61 per cent stake in the company.

The other substantial shareholders in Cannasouth are Nicholas Foreman (who holds an equivalent stake to Lucas) and Adam Sorensen, who holds an 8.93 per cent stake.

Lucas said the company plans to hire more staff shortly and is looking into production options “in preparation for getting to revenue as soon as possible”.