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Pot stocks tumbled a day after Ontario said the private sector will be allowed to sell recreational marijuana in stores by April, a decision that is raising concerns about when the new system will be finalized, how it will work and how much cannabis will be sold this year.

On Monday, Ontario said its government-run website will open on Oct. 17, but storefronts will be delayed until April 1, five months after Ottawa legalizes the drug. Not having any physical-store shelves to fill in Canada’s largest province for nearly half a year weighed on the stocks of the biggest growers on Tuesday, with shares of Canopy Growth Corp. falling 8 per cent and Aurora Cannabis Inc. and Aphria Inc. dropping 10 per cent.

Cannabis companies and their investors had already grappled with policy changes that delayed the start of the recreational market from July to October.

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“The increased uncertainty is spooking investors,” said Matt Bottomley, a Canaccord analyst who covers the cannabis sector. “Delays aren’t good news because investors might be baking in the expectation of revenue starting meaningfully this fall. And this will weigh on near-term earnings for these companies.”

That Ontarians must wait until 2019 to buy cannabis in a legal store or – as with the rest of Canada – buy edibles or vape pens until later next year, may stifle initial legal sales for licensed producers (LPs) and do little to thwart the illicit market, he added.

“It’s going to take a year or so for this market to get on its feet and we’re seeing signs of that already,” he said. “It’s not going to be a switch that you just turn on.”

Ontario’s Liberal government had planned to give the Liquor Control Board of Ontario (LCBO) a monopoly on recreational cannabis, with 40 physical stores to open in the first year under the Ontario Cannabis Store (OCS) banner. With the Tory changes, some companies are now deciding that they should get into retailing if the rules allow it. One is Grower CannTrust Holdings Inc. of Vaughan, Ont., which had not been looking to open a store. Its stock was up 3 per cent on the day.

“Whoever controls the last mile controls the margin,” Eric Paul, chief executive officer at CannTrust, said in an interview. “We’re going to be in the retail business. We don’t have a choice. All of us, or anybody who’s substantive, is going to have to be in the retail business.”

Related: Ontario delays debut of private-sector cannabis

Under the provincial Liberals' system, growers assumed their products would be in every OCS store. But that won’t be the case any more, with the number of retailers expected to balloon from one to hundreds. “Now, with someone else controlling the ordering even though we’re listed as an approved supplier, that doesn’t mean that stores are going to naturally stock our product,” Mr. Paul said.

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He said the delay is “a blessing in disguise” because it gives growers time to cultivate more product amid concerns of supply shortages.

“Getting ready for all of these provinces is quite a feat,” Mr. Paul said. “I think it’s good for us. I don’t care short-term. The market does what it does, it overreacts – that’s typical. But we’re not short-term players, we’re long-term players.”

Mr. Bottomley agrees. “It could be good for some producers to make sure they don’t start too aggressively and fall on their face,” he said.

He said the impact of Ontario’s move to open up retailing to the private sector is “neutral to positive” for valuations of pot stocks. “It may have gone from the worst province for the LPs to the best, overnight,” Mr. Bottomley said, adding that the old model pitted growers against the LCBO, which is the largest purchaser of alcohol in the world and can squeeze producers and set retail prices for consumers.

The OCS expected to control wholesale and retail prices, but hasn’t signed any supply agreements yet. Now it will have to figure out how much it should charge private retailers.

The rules for pricing at private stores are also up in the air, but fiercer competition likely means lower prices for consumers and possibly lower margins for retailers. In Alberta, which is looking to award 250 private-sector licences, retailers can set their own prices. The province’s alcohol regulator plans to sell marijuana to retailers without any markup at the outset of legalization to keep prices low and fend off the black market.

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The OCS is ready to focus on its new role, says president Patrick Ford, the former vice-president of human resources at the LCBO who joined the OCS in early August.He replaced David Phillips, who was named interim president after former president Nancy Kennedy joined the new Ford government in late June.

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