Flora Growth has filed to go public via an initial public offering (IPO), with plans to raise $15 million. The Columbian hemp grower is looking to raise the cash by offering 3.3 million shares. At the midpoint of this proposed range, Flora Growth would command a market value of $221 million.
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Currently, the cannabis company is highly unprofitable as it only began producing tangible products in August 2020. Therefore, investors have found it very difficult to decide if Flora Growth’s shares have been adequately priced ahead of its market debut on Wednesday.
What is Flora Growth?
Flora Growth is a cannabis company that wants to become the largest low-cost provider of naturally grown medicinal-grade cannabis oils and extracts in the world. The Canadian-owned company was founded in 2019 and produces natural medicinal-grade cannabis oil, high-quality cannabis-derived medical, and hemp-based products in Columbia, South America.
When can I buy Flora Growth stock?
Flora Growth will go public via IPO on the NASDAQ on Wednesday, March 31, 2021.
What price is Flora Growth going public at?
Flora Growth is expected to go public priced between $4 and $5 per share under the ticker symbol, FLGC.
Flora Growth Financials
As of June 2020, Flora Growth had $6.2 million in cash and $1.5 million in total liabilities. However, the company currently has no material revenue history so it’s difficult to adequately analyze the company from an investor viewpoint.
Flora Growth only makes money from its skincare, cosmetic, pharmaceutical, textiles, food, and beverage lines and hasn’t generated any funds for its medicinal-grade cannabis, oils, and extracts. The company says it expects these products to start pulling in cash by July 2021 and the proceeds from the IPO will likely be used in marketing.
In Flora Growth’s SEC filing, the company stated: “We have limited financial resources and no source of operating cash flow. In addition, we do not currently have significant revenues and for the year ended December 31, 2019 had losses of $ 2,844,111 and an accumulated deficit of $ 2,824,326.”
On a positive note, Flora Growth stands to benefit financially from operating in Columbia. The company says that by growing in the region, they are met with favorable environmental conditions while the country also has a workforce of highly-skilled agricultural laborers that come at a lower cost compared to the U.S.
Market Opportunity
Flora Growth is eyeing the U.S. stock market to fund its market expansion plans within Colombia and internationally. The company intends to supply its products to large channel distributors — like pharmacies, medical clinics, and cosmetic companies.
The global legal marijuana market is expected to hit $84 billion by 2028, making it one of the fastest-growing industries. The cannabis industry in the U.S. is also poised for future growth, especially if President Joe Biden decriminalizes marijuana at a federal level. But even if Biden doesn’t go ahead with this plan, many states are still looking to relax recreational weed use meaning that companies like Flora Growth will soon have a bigger market to sell to.
Should I buy Flora Growth stock?
The company now has a good opportunity to capitalize on providing various cannabis and hemp products to the U.S. market as more states and countries around the world legalize its use.
IPOs are also known for being very volatile and given that the company has only very recently started generating income, but the company is still being valued at $220 million, this stock would be classed as a very risky investment.
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