Aurora Cannabis: The 11,800% Gain No One Saw Coming

Over the next decade, marijuana is projected to be one of the fastest-growing industries. We already know that tens of billions of dollars in sales are currently conducted in the global black market. If legalization slowly but surely moves these consumers to legal channels, cannabis companies shouldn’t have any trouble delivering the green to investors…

But as we’ve learned over the past few years, not all marijuana stocks are built to thrive as cannabis goes global. Canadian licensed producer Aurora Cannabis (NYSE:ACB) is a perfect example.

Aurora Cannabis has shattered shareholders’ dreams

Aurora Cannabis is an absolute favorite among millennial investors; prior to its reverse split in May, it was the most held stock on investing platform Robinhood. The bullishness surrounding Aurora can be summed up as follows:

  • Top-tier production: Aurora had 15 cultivation facilities that, if fully developed, could have yielded more than 650,000 kilos of weed annually. The ability to produce so much pot made it a likely candidate for long-term domestic and international supply deals. It was also widely believed that Aurora’s large-scale output would yield some of the lowest growing costs per gram in the industry.
  • Unparalleled international access: Aside from being a capacity hound, Aurora had a production, export, partnership, or research presence in 24 countries outside of Canada. This includes the U.S., which Aurora entered through its purchase of cannabidiol (CBD)-based company Reliva.
  • Partnership appeal: In March 2019, Aurora hired billionaire activist investor Nelson Peltz as its strategic advisor. Peltz’s focus on consumer packaged food and beverage companies made him a logical liaison to broker an equity investment or partnership.

But here’s where things stand today:

  • Production more than halved: Over roughly the past year, Aurora Cannabis has shuttered five of its smaller cultivation facilities, sold its 1-million-square-foot Exeter greenhouse, and halted construction on two of its largest projects. Peak annual output is now probably in the 200,000 kilos to 250,000 kilos range.
  • International sales are virtually nonexistent: Despite Aurora’s expected reliance on foreign markets to offset supply concerns in Canada, international sales have struggled to significantly surpass $4 million Canadian a quarter.
  • Peltz resigns: After roughly a year and a half, Peltz recently stepped down. He failed to broker any significant or lasting deals for Aurora.

The 11,800% gain shareholders aren’t thrilled about

Aurora Cannabis’ problems continue to mount.

Earlier this week, the company announced that it had fully completed a $250 million (that’s U.S.) at-the-market (ATM) offering first announced in April. This $250 million ATM followed a completed $400 million ATM offering. After effectively selling its common stock at whatever the current price was for Aurora’s shares, the company ended Oct. 26 with $272 million in cash and $11 million in untapped revolving credit.

More importantly, as of Oct. 26, Aurora’s share count had ballooned to…

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