The Flowr Corp.
Last month the Toronto-based firm announced a $125 million public offering to fund its purchase of Holigen Holdings Ltd. and inject capital into its other operations. That followed news that it has been approved to have its shares listed on the Nasdaq Capital Market.
Yet its share price has fallen off a cliff, decreasing 43.6% from $7.10 on June 24 to $4.00 when trading closed on Thursday.
A number of pot stocks’ lofty valuations have been crashing back to earth in the past couple of months. There are fears caused by stalling sales in Canada’s recreational cannabis market and uncertainty around legality issues in the U.S.
Flowr felt the need to announce it is “not proceeding with the offering due to prevailing market conditions, which were not conducive to the completion of the offering on terms that would be in the best interest of Flowr’s current shareholders”.
No securities have been sold in connection with the offering and it is also reassessing the timing of its NASDAQ listing.
Since making the announcement, FLWR opened at $4.51 today and increased to $4.89 within 10 minutes of trading.
Yet it casts doubt on Flowr’s acquisition of Holigen, which has not yet closed.
The two companies appear to be strange bedfellows, as Flowr is trying to create the world’s most premium cannabis at its facility in Kelowna, British Columbia, whereas Australian firm Holigen is poised to become one of the world’s largest producers by volume.
It plans to produce more than 600,000 kg on an annualized basis at an enormous facility in Portugal’s Alentejo region. Flowr purchased a 19.8% share in the firm for what looked like a bargain $6 million back in December 2018.
It then agreed to purchase the remaining 80.2% of the business last month in a cash-and-stock deal, but the public offering was designed to help raise the necessary funds for the sale to go through.
Flowr, which was set up by MedReleaf co-founder Tom Flow, provided no operational update in the note that revealed it is cancelling the public offering, and it did not shed any light on this acquisition, but it pledged to “continue to monitor market conditions as it evaluates options to drive long-term growth”.
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