Fire & Flower Holdings Corp. (FAF:TSX; FFLWF:OTCMKTS) applied for and was granted court protection from creditors to "facilitate the development of an orderly process to streamline its operations and conduct a court-supervised sales process," reported Echelon Capital Markets analyst Andrew Semple in a June 6 research note.
"The intent of these actions is to maintain a going concern solution and maximize remaining value for stakeholders," Semple wrote.
Fire & Flower is a Canadian retailer and distributor of consumer cannabis products and accessories.
Initial Court Order
Subsequent to Fire & Flower applying for creditor protection under the Companies Creditors Arrangement Act, the Ontario Superior Court stayed proceedings against the company, approved a CA$9.8 million debtor-in-possession loan to the company from a subsidiary of Alimentation Couche-Tard (ACT) and appointed FTI Consulting Canada to monitor the company.
Fire & Flower's Board of Directors chose to pursue creditor protection after a financial adviser, hired last month, outlined the potential options for moving forward.
After the company announced on May 26, 2023, it was undergoing a strategic and financial review, and its stock price plummeted 66%. When Semple prepared this report, the cannabis firm's share price was about CA$0.29, and trading of its shares on the Toronto Stock Exchange (TSX) had been halted.
Echelon expects the TSX will place Fire & Flower under delisting review, the outcome of which it cannot predict.
Too Many Unknowns
Given Fire & Flower is under creditor protection, and its future is unclear, reported Semple, Echelon revised its rating on it to Under Review from Speculative Buy. Also, because Echelon can no longer estimate an equity valuation on Fire & Flower given the various possible outcomes, the equity research firm abandoned its previous CA$2 per share target price on it.
To salvage value for shareholders, Semple indicated, Fire & Flower could perhaps generate proceeds from divesting certain assets or from additional financing commitments. Maybe the company could sell itself in its entirety, optimally to a group known to acquire cannabis retailers. Or ACT might buy the whole company out of CCAA proceedings "with potentially some value allotted to current equity holders."
However, Semple pointed out that even if a party were interested in acquiring all of Fire & Flower, such a transaction would likely be quite dilutive to existing shareholders. Another less optimal bleak scenario is that no party comes forward to buy the company, hindering its ability to stay afloat.
|Want to be the first to know about interesting Cannabis investment ideas? Sign up to receive the FREE Streetwise Reports' newsletter.||Subscribe|
- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
- This article does not constitute medical advice. Officers, employees and contributors to Streetwise Reports are not licensed medical professionals. Readers should always contact their healthcare professionals for medical advice.
For additional disclosures, please click here.
Disclosures for Echelon Capital Markets, Fire & Flower Holdings Inc., June 6, 2023
Echelon Wealth Partners Inc. is a member of IIROC and CIPF. The documents on this website have been prepared for the viewer only as an example of strategy consistent with our recommendations; it is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular investing strategy. Any opinions or recommendations expressed herein do not necessarily reflect those of Echelon Wealth Partners Inc. Echelon Wealth Partners Inc. cannot accept any trading instructions via e-mail as the timely receipt of e-mail messages, or their integrity over the Internet, cannot be guaranteed. Dividend yields change as stock prices change, and companies may change or cancel dividend payments in the future. All securities involve varying amounts of risk, and their values will fluctuate, and the fluctuation of foreign currency exchange rates will also impact your investment returns if measured in Canadian Dollars. Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money. Data from various sources were used in the preparation of these documents; the information is believed but in no way warranted to be reliable, accurate and appropriate. Echelon Wealth Partners Inc. employees may buy and sell shares of the companies that are recommended for their own accounts and for the accounts of other clients. Echelon Wealth Partners compensates its Research Analysts from a variety of sources. The Research Department is a cost centre and is funded by the business activities of Echelon Wealth Partners including, Institutional Equity Sales and Trading, Retail Sales and Corporate and Investment Banking.
Research Dissemination Policy: All final research reports are disseminated to existing and potential clients of Echelon Wealth Partners Inc. simultaneously in electronic form. Hard copies will be disseminated to any client that has requested to be on the distribution list of Echelon Wealth Partners Inc. Clients may also receive Echelon Wealth Partners Inc. research via third party vendors. To receive Echelon Wealth Partners Inc. research reports, please contact your Registered Representative. Reproduction of any research report in whole or in part without permission is prohibited.
Canadian Disclosures: To make further inquiry related to this report, Canadian residents should contact their Echelon Wealth Partners professional representative. To effect any transaction, Canadian residents should contact their Echelon Wealth Partners Investment advisor.
U.S. Disclosures: This research report was prepared by Echelon Wealth Partners Inc., a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. Echelon Wealth Partners Inc. is not registered as a broker-dealer in the United States and is not be subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. Any resulting transactions should be effected through a U.S. broker-dealer.
U.K. Disclosures: This research report was prepared by Echelon Wealth Partners Inc., a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. ECHELON WEALTH PARTNERS INC. IS NOT SUBJECT TO U.K. RULES WITH REGARD TO THE PREPARATION OF RESEARCH REPORTS AND THE INDEPENDENCE OF ANALYSTS. The contents hereof are intended solely for the use of, and may only be issued or passed onto persons described in part VI of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001. This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein.
Copyright: This report may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or conclusions contained in it be referred to without in each case the prior express written consent of Echelon Wealth Partners.
ANALYST CERTIFICATION Company: Fire & Flower HoldingsInc. | TSX:FAF
I, Andrew Semple, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.