Aurora Decreases Potential Stock Issuance to $250M From $350M

We previously reported on Aurora Cannabis’ plans to raise more capital in an at-the-market equity program valued at around $350M.

Now we are getting news that in a recent filing with SEDAR, the company has made plans with Cowen & Co and BMO Capital Markets to increase the original $400M program up to $650M, a $250 million increase.

The stock is up on the news today as this would mean less shares are going to be issued.

An at-the-market equity program simply means the company plans to issue more stock so has gone through the legal filings early to make it easier to issue stock whenever they want.

Historically Aurora has used the entire equity program.

At the current stock price of $0.71/sh Aurora will be increasing the share count by 26% to 1.7 billion shares from 1.3 billion currently.

Aurora says that it intends to use the money raised from this equity sale to:

  1. Increase working capital
  2. Potential future acquisitions
  3. Debt repayments
  4. Capital expenditures

This news comes at a bad time for Aurora Cannabis shareholders which have already seen huge losses in share price and will be further diluted by this increased offering of shares.

The offering has just started so investor’s should expect the stock to continue going lower as these new shares flood into the market. Aurora needs the cash so it is highly likely they will use the entire $250 million.

Aurora Cannabis has, earlier in the week, just announced a 12-to-1 reverse-split of its common shares. This was most likely done in an effort to prevent its shares from being delisted from the NYSE since it is now consistently trading under $1 per share.

Last December, Aurora Cannabis fired its Chief Operating Officer Cam Battley. In February, Chief Executive Officer Terry Booth also stepped down.

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Previous CEO Terry Booth likely saw the writing on the wall and wanted to get ahead of the reverse listing and increased stock issuance which explains why he sold most of his shares in early March.

A wave of unplanned executive exits is never good news for any company, nevermind the reports we have been receiving of company insiders selling significant portions of their shares in the company despite the fact that the stock price has dropped over 90% since the same time last year.

For example, we got the news last December that Director Jason Dyck had sold more than 1 million of his shares, equal to 57% of his holdings.

Investors should expect more pain ahead for Aurora Cannabis as it issues $350 million new shares and struggles to bring down costs and grow EBITDA to meet restrictive debt covenants.

The company still has to generate positive EBITDA by the end of September, a C$86 million swing from last quarter.

This will require a significant increase in sales and margins as well as the already announced cost cuts.

Aurora is not out of the woods yet.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Grizzle hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

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Categories: Marijuana News
Andy Zhou: Andy Zhou graduated from the University of Waterloo in Ontario, Canada, in 2019 with an bachelor’s degree in mathematics (honors). Throughout his time at university, he took on various internships at many major Canadian companies, including the Royal Bank of Canada and Loblaw. In October 2016, he enrolled in the university’s official stock simulator game, StockTrak run by the Faculty of Mathematics. By the time of his graduation, Andy ranked fourth out of 535 participants, with a total portfolio net return of 98 percent. In the last year of university prior to his graduation, he founded and led the UW FIRE Club, where he led discussions and debates on all topics related to finance and investing.
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