Fire & Flower Goes Public, Shares Drop Sharply, Reveals Great Buying Opportunity In 2019 Top Growth Play

The next hot marijuana “IPO” is here.
 
By most measures, it’s a big disappointment.
 
Fire & Flower (CAN:FAF) were placed at C$1.50 per share where C$36 million were raised to take the company public.
 

At one point Fire & Flower shares were down 25% from the “IPO” price. But they did recover a little bit before the market closed to end up down a mere 10.7%.
 
That’s a terrible first impression and, at first glance, it’s a bad omen.
 
After all, if a stock is down, something must be wrong…right?
 
Here’s the thing. This is bad. There’s no way to spin it positively. Any time an IPO falls below its placement price on its first day of trading, it shows it was overpriced and the demand just isn’t there.
 

And this is quite a surprise for a lot of marijuana investors looking at Fire & Flower. After all, the marijuana industry has been waiting months for this Canadian marijuana retail stocks to hit the public markets because it has everything going for it.
 

However, Fire & Flower is an ideal story (except for one temporary problem which we’ll get to below).
 

As we mentioned above, Fire & Flower raised C$36 million in new capital as it went public at a price of C$1.50 per share.
 
It’s in ideal position as a retail store-focused marijuana company in Canada.
 
It already has seven retail stores in Alberta, two in Saskatchewan, a wholesale business in Saskatchewan. It plans to expand to British Columbia, Manitoba, and Ontario.
 
It has attracted the backing by some of the biggest heavyweights of Canadian marijuana industry.
 
Aphria (APHA/APHA) invested C$9.2 million into Fire & Flower last year.
 
HEXO Corp (HEXO/HEXO) invested C$10 million last summer.
 
TerrAscend (TER/TRSSF) invested $2.5 million early last year as well.
 

These big marijuana companies have and are continuing to build massive cultivation facilities. However, they need distribution for their product. They must turn to retail-focused companies. Fire & Flower is one of those companies in position to provide that essential distribution through retail stores to end consumers.
 

Finally, Fire & Flower just announced it has inked deals with two of the Ontario marijuana retail license lottery winners to get access to Canada’s largest legal marijuana market.
 

Like we said, Fire & Flower couldn’t be in better position…it has everything…Capital, backing from top marijuana companies, a retail store footprint, and big expansion plans for the year ahead.
 
Here’s the problem though.
 

Fire & Flower’s “IPO” was a flop because Canadian marijuana retailer stocks are very out of favor with investors right now.  
 

And that right there is what makes Fire & Flower and all marijuana retail store stocks a tremendous gift to marijuana investors right now.
 
You see, the retail segment of the Canadian marijuana industry has stumbled out of the gates.
 
Canada’s “Cannabis Act” went into effect on October 17, 2018 and became the first country to fully legalize marijuana usage.
 
It all happened a bit too fast for regulators though because, while marijuana was legal in the country, the actual regulatory nuts and bolts were left to the individual provinces which has become a major impediment to the growth of the retail industry.
 
For example, the day marijuana went legal in Canada, British Columbia regulators had only issued one retail store license for entire province and its 4.9 million residents.
 
Worse yet, that license wasn’t even issued in or around Vancouver, B.C. where most of the population resides.
 
Take Ontario as another example.
 
Ontario just got around to issuing retail licenses a few weeks ago, months after marijuana was legalized nationwide.
 
There was so much demand for licenses in Ontario regulators just held a lottery for the first 25 retail marijuana licenses.
 
Over time, these problems will get sorted out and investors should be getting positioned for it now.
 
Over the remainder of the year The Seed Investor foresees two catalysts to drive the shares of marijuana retailers like Fire & Flower higher.
 
First, the regulatory framework will get sorted out, licenses will be issued, and the retail companies with ample capital will build out their networks throughout Canada.
 
Second, the regulations around marijuana concentrates which are used in vapes, edibles, and other non-traditional marijuana products will be finalized. Expect a surge in marijuana sales and consumption after that because a major portion of the potential marijuana market which has no interest in smoking marijuana.
 
These two factors will cause an explosion of Canadian marijuana retail stocks which have lagged far behind the rest of the marijuana sector over the last few months.
 
Until then, consider the fact marijuana retail store stocks aren’t sparking much interest among marijuana investors to be a positive thing.
 
All that will change slowly as we progress through the year as regulatory environment clears up, the stores open, and sales pour in.
 
Net result: The Seed Investor expects marijuana retailers will be the big winners in 2019.