Global Opportunities Beyond the Radar

Cannabis Upswing: Rua Bioscience [NZX.RUA] Peaks at 5.26%

Recreational pot


Rua Bioscience is one of New Zealand’s leading names in the domestic cannabis industry.

The share price surged as high as 5.26% today, at $0.40 per share.

The company currently has a market capitalisation of approximately $54.7 million.

Apart from having involvement in establishing the regulatory framework of the sector, Rua Bioscience focuses on the research, cultivation, extraction, and manufacturing side within New Zealand’s medicinal-cannabis supply chain.

Globally, the cannabis industry has made progress by leaps and bounds in recent years.

Much like a plant itself, the industry must receive enough sun and water in the shape of policy reform and adapted societal views in order to flourish.

As more countries begin to unwind their conservative judgement regarding cannabis, an emerging industry may be opening up. This may pave the way for bold companies to capitalise upon.

For Rua Bioscience, the foundation has been built, but the road is still long.


Why is [NZX:RUA] up today?


At this stage, price fluctuations are most likely the result of positive sentiments in industry growth worldwide. The progress and development in other countries will no doubt affect their New Zealand-based equivalents.

As positive news and sentiment begins to emerge in cannabis industries offshore, domestic investors may react with increased demand for local companies such as Rua Bioscience. 

Some of the recent global highlights to consider include:


Where could Rua Bioscience go from here?


Right now, the cannabis industry is slow to develop and grow within the New Zealand market.

Development has been halted by events such as last year’s slim defeat in the cannabis legalisation referendum. A lack of further hype in the industry, mixed with the continued lack of policy reform, can explain why a profit has yet to be seen for any domestic cannabis companies.

However, what does the future look like for [NZX.RUA]?

Rua now holds an undivided distribution agreement with German pharmaceutical wholesaler Nimbus Health. The German cannabis market is estimated to be worth over NZ$1.4 billion by the end of 2024.

With the acquisition of Dr Andrea Grant, Rua may in a better position to find even more markets to export to.


Risk factors to consider


There are a couple of important things to note when assessing the company as it stands:

No doubt, the cannabis industry is a risky one and highly speculative. Rua Bioscience continues to remain a small cap stock with a significant risk profile.

Unfortunately, the ride to date with the [NZX.RUA] share price has been very disappointing for a new listing. After the IPO in October 2020 at $0.70, the share has languished below $0.50 the past few months. 

We will be continuing to watch for some more potential ‘breakout’ news. Though we do acknowledge small growth companies can take some years to hit their stride. That was certainly the case with the early days of companies like a2 Milk [NZX:ATM]. Except cannabis is a far more speculative, controlled, and increasingly competitive sector.

Discerning investors should carefully weigh their risk appetite on what the future prospects of the cannabis industry in New Zealand may be.



Samael Knaap,
Analyst, Wealth Morning

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