28 Mar 2024

Medical cannabis company in voluntary administration after failing to raise investor funds

7:20 pm on 28 March 2024
Indoor Marijuana bud under lights. This image shows the warm lights needed to cultivate marijuana.

New Zealand's medicinal cannabis industry has struggled to achieve profitability since its legalisation in 2020. Photo: Eric Limon/ 1234RF

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

Earlier this week, share trading in the company 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 percent 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.

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