One of the ASX’s upcoming cannabis IPOs has put off its listing, so it can be a property developer.

CannVaLate had been looking at a $65m IPO in February or March to raise $4m, but are now crossing their fingers for the later half of 2019.

It all depends on whether they can get hold of pot permits to build four cannabis facilities in Victoria, which they intend to lease to Canadian companies wanting a hit-the-ground-running site.

CEO Dr Sud Agarwal is delaying the IPO until they can offer investors licences, which they hope will arrive by the middle of the year, pre-committed lessees, and deposits from said before asking for money to develop the land.

What happened to the software?

In October, the company pitched itself to Stockhead as a tech play.

It had bespoke software that matches a cannabis application with a licensed producer, such as one of the 12 Canadian companies they have distribution agreements with.

Dr Agarwal says about 1000 GPs now use it to open a Therapeutic Goods Administration application for a patient to use a cannabis product, and CannVaLate handles the backend process.

‘We’re actually a B2B services play’

CEO Dr Sud Agarwal says they’re now also building four fully Office of Drug Control-permitted cultivation-R&D-manufacturing sites as part of a B2B services offering.

These they will lease to Canadian companies wanting to establish local centres to service the Australian and New Zealand markets.

“[Many want] a walk in, permit ready site where they can start cultivating the next day…and they’re prepared to pay a premium for that,” he told Stockhead.

Dr Agarwal says they have four Canadian companies who have signed pre-commitment agreements to lease all or part of the sites, so long as CannVaLate can get the sites permitted.

Wait, is this even possible in Australia?

Experts spoken to by Stockhead were initially split over whether this is even possible: on the face of it, all cannabis licences have to held by a “fit and proper” person or company.

But it turns out there are some loopholes which make this set-up legal and even possibly able to get ODC approval.

In Australia companies need to have licences for cultivation, R&D and manufacturing in order to start preparing their sites, and then permits once they’re ready to start operations.

READ: ASX cannabis stocks right now: here’s everything you need to know 

The managing director of cannabis licence consultant PharmOut, Trevor Schoerie, says the system of building a third party site and leasing it out is likely to be possible, but any licences would have to be in the operator’s — in this case CannVaLate’s — name and they would be responsible for ensuring the lessees fulfil the legal requirements of the licences and permits.

One analyst, who later asked not to be named, disagreed and said it was impossible under his reading of the regulations.

But Dr Agarwal says they have a simple workaround.

They will simply add the lessee to their licence — although given the months-long delays at the Office of Drug Control in handing out licences, this could be a lengthy enterprise.

It’s a situation that hasn’t been tested yet so CannVaLate will be an example for others interested in doing the same thing.

Using Australia as a stopover for New Zealand?

These Canadian companies want a base in Australasia, says Dr Agarwal.

But given the restrictions on this market that show no sign of letting up and the fact that the New Zealand market opens up to recreational use next year, Victoria could just be a convenient jump-off point to go across the ditch.

One of CannVaLate’s pre-committed companies is a cannabis chocolate maker, although none want to be identified yet.

Dr Agarwal says they’ve chosen Australia because of the technical expertise available here.

This is despite the fact that land is cheaper in New Zealand and, given the sudden boom in New Zealand cannabis since legalisation began in late 2018, expertise is clearly available.