Joint venture: Australia marijuana IPO creates market buzz

By Jane Wardell SYDNEY (Reuters) - Australia's first initial public offering in a medicinal marijuana company is three times oversubscribed, giving high hopes to its founder's ambitions to become "the George Clooney of medicinal cannabis". Perth-based Phytotech, due to list on the Australian Securities Exchange on Dec. 22, is seeking to raise A$5 million ($4.2 million). Founder and executive director Ross Smith said investors - some from as far afield as Russia and the United States - have already asked for shares worth $A15 million. "South of the equator there's nothing available in the medicinal cannabis sphere," Smith told Reuters by telephone. "We're going to close it early because it's so massively oversubscribed." Smith set up Phytotech in August to sell medicinal marijuana and develop a disposable device to inhale the drug. He envisions any advertising for the products to run along the lines of the ads for Nestle Nespresso coffee machines that feature Clooney. "I'd be on the shore of Lake Como, puffing away and two beautiful women would come up and say, 'Is that a Phytotech?' and I'd say 'Why, yes'," Smith said with a laugh. According to the IPO prospectus filed with the stock market regulator, Phytotech plans to grow medicinal grade marijuana in Israel, the only country that allows exports of the drug, for sale in the United States, Canada and Europe. It is also positioning itself for possible changes in Australia, where the cultivation and sale of cannabis are banned. There are trials to grow medical cannabis in a couple of states and legislation to allow its sale is before parliament. Phytotech priced its IPO at A$0.20 a share, the minimum issue price stipulated by the Australian Securities Exchange. It is offering 25 million shares. "It is priced for risk," Smith said. "But if we don't list at A$50 million plus on debut, I'll be very surprised." Shares in companies offering medicinal marijuana have already proved a hit in the United States, giving rise to a so-called "dot bong" boom. Around 20 countries and scores of U.S. states have legalized medical cannabis use. Smith, 51, who was convicted for possessing and cultivating marijuana in 1989, said the idea for the business came to him when he was offered medicinal grade marijuana while hiking in New Zealand last year. "I'd broken my back previously and with a few puffs I could walk up and down mountains easily, carrying a heavy rifle and a deer or pig or whatever," he said. (Editing by Miral Fahmy)