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$5m priority share offer for Tairawhiti residents

Based on strong commitments from a bookbuild process, pharmaceutical company Rua Bioscience yesterday lodged its Product Disclosure Statement (PDS), including details of a priority offer for Tairawhiti investors as part of its Initial Public Offering (IPO.

Rua Bioscience was founded in 2016 on the East Coast, and the company is aiming to be a leading producer of cannabinoid derived medicines.

Up to $20 million in new capital is being sought to fund Rua's next stage of development, support the achievement of sustainable revenue and accelerate growth.

The company's market capitalisation of $70 million assumes the offer of 40 million shares, at 50 cents per share, is fully subscribed.

A priority offer of $5 million worth of shares is available to Tairawhiti residents, existing shareholders in Waiapu Investments Limited and other people closely associated with the business.

A total of $15 million shares have been allocated across a number of retail brokers in New Zealand, as well as to a small number of institutional investors.

Rua intends to list on the NZX Main Board in late October 2020. All funds raised will be for growth, with no sell-down by existing shareholders at the time of IPO.

Cornerstone shareholders, directors and senior managers who currently hold shares in Rua will be escrowed for approximately 11 months.

Company chairman Trevor Burt says Rua received strong support in the bookbuild.

“We are very pleased that New Zealand's investment community sees Rua as a credible and focused company within a sunrise industry. The demand for shares was well in excess of our target, and allocations to some participants in the bookbuild needed to be scaled.

“We are proud of the company, its progress and its clear strategy presented in the PDS for prospective investors,” Mr Burt said.

Co-founders Manu Caddie and Panapa Ehau said they were thrilled to provide a priority offer to the Tairawhiti community that had supported and helped build the company since its inception in 2016.

“As a company grounded in our local community, it's important to us that locals are given the opportunity to invest in Rua as we enter our next exciting stage of growth.”

The offer is expected to open on Monday, October 5.

As there is no public pool of shares available in the offer, members of the public who do not meet the priority criteria are encouraged to contact their broker.

Proceeds from the offer will be invested in German market development, the expansion of Rua's current facilities, investment in long-term research and development, and to fund operational costs and working capital as Rua enters commercial production.

The PDS and link to the Register Entry containing additional material information about the offer is available at www.shareoffer.co.nz/rua

The lead manager of the offer is Northington Partners Limited.

Rua Bioscience holds a medicinal cannabis licence from New Zealand's Medicinal Cannabis Agency and has recently completed construction of an operational controlled cultivation facility in Ruatorea and an extraction and manufacturing facility in Gisborne.

“As medicinal cannabis is a pharmaceutical product, these facilities must be GMP (Good Manufacturing Practice)-certified before commercial production can occur,” said Rua chief executive Rob Mitchell.

“Our GMP paperwork has been submitted to Medsafe and our first GMP audit is scheduled to take place before the end of the year.”

Rua Bioscience has an “export-led” strategy aimed at achieving sustainable revenue as quickly as possible. Rua has signed a binding sales agreement with Nimbus Health GmbH, a fully licensed German importer and distributor focused on medicinal cannabis products.

“We are very pleased to have Nimbus as our distribution partner. Germany is the largest single market for GMP grade medicinal cannabis in the world and Rua anticipates its first exports to occur by the end of 2021,” Mr Mitchell said.

■ With Waiapu Investments Ltd (WIL) shares converting to Rua Bioscience shares prior to listing at a price of 50 cents per share, each WIL share will convert to approximately 4.41 RUA shares (worth about $2.20 at the time of listing). So the value of WIL shares has more than doubled since locals invested in 2018.