Transformational acquisition and capital raise
Earlier today, our cannabis innovator investment, Bod Australia (ASX:BOD) came out of its trading halt announcing a “transformational acquisition” alongside a capital raise.
Looking first at the acquisition, Bod intends to acquire Aqua Phase, a process technology which increases the bioavailability (i.e. the ability of a substance to be absorbed and used by the body) of cannabis compounds.
The total size of the deal is £3m (~A$5.2m) is quite substantial when compared to Bod’s market cap of ~A$10M prior to announcing the proposed acquisition, which points to its significance (hence “transformational” in the title of today’s ASX announcement) and Bod’s strategy to focus heavily in innovation and R&D. This is further evident with Bod also currently progressing multiple clinical trials for new products and treatments.
Looking at the technology, we note its impact on bioavailability - which is the ability of a substance to be absorbed and used by the body. This matters as CBD/ cannabinoids typically have very poor biological absorption - for instance, oral CBD compounds in oil are estimated to only have 6-8% bioavailability. Improving bioavailability can deliver faster onset, better efficacy, lower dosing and fewer side effects, positive attributes for both consumer and medical cannabis products.
Furthermore, the Aqua Phase technology can potentially deliver a cannabis complex which is soluble, tasteless, colourless and odourless. This has the potential to open up opportunities and markets for new delivery formats for cannabis products superior to existing oral formats currently being utilised.
Turning to the capital raise, Bod can raise up to $3.5M at an offer price $0.08 per share via:
- A placement (with firm commitments for entirety) raising $1.5m
- A 4 for 17 pro rata, non-renounceable entitlement offer to raise up to $2m
We like that the Placement includes the conditional placement to the chairman ($100k) and managing director ($50k), with the chairman also underwriting a further $100k should there be a shortfall in the take-up of the entitlement offer - a sign of their confidence in the business.
Funds raised will be directed as follows:
Key dates for the raise are:
We are planning to provide an in-depth analysis of the acquisition and what the new Bod looks going forward. In the interim, here is our Bod Investment Memo and what we’re looking for the company to deliver for the rest of the year.
