Is Aurora Cannabis On The Brink Of Default Or Telegraphing A Potential Acquisition?

Something fishy seems to be going on at Aurora Cannabis Inc. (TSX: ACB) (Nasdaq ACB) and we are closely following the business after it delayed the release of fourth quarter financial results by a week. 

The decision to push the fourth quarter and full fiscal year 2021 earnings report to after the market closes on September 27th comes at an interesting time for the Canadian cannabis producer and we continue to remain cautiously optimistic with the embattled operator. Some of reasons for our concerned view on Aurora Cannabis is due to the following:

1. The stock has fallen almost 20% from its September highs 
2. Several broker-dealers have lowered its price target on the stock 
3. The prior earnings report was weak and market conditions remain tough in Canada
4. The new management team has been slow to execute 
5. Other Canadian operators have been reporting faster growth than Aurora

A Fall From Grace

A few years ago, Aurora Cannabis was considered to be an industry leader and was a darling on Wall Street. Fast forward to today and you have a business with slowing sales growth, a weakening balance sheet, and a fragmented footprint. 

During the last quarter, several leading Canadian Licensed Producer (LPs) have reported plans to close additional facilities to lower costs and consolidate operations. Aurora Cannabis has already closed several production facilities (in Canada and abroad) and we believe the market would be spooked if the management team decided to close more facilities. 

A key factor in our opinion related to how the market may be spooked by Aurora closing additional facilities pertains to the amount of money that was spent to open them. When the Canadian cannabis producer was in expansion mode, the previous management team was spending hundreds-of-millions of dollars to construct state-of-the-art automated production facilities across Canada.

While Aurora Cannabis was rapidly expanding, many broker-dealers were valuing Canadian LPs on a funded capacity basis. We had our concerns with this valuation metric when we first learned about it and found it to be almost laughable. 

Will Aurora Cannabis Survive 2021?

A lot has changed since Aurora Cannabis was considered to be a leading Canadian LP and we are concerned with the direction the new management team is bringing the business. Going forward, we will remain cautiously optimistic with the business and will provide updates on how the story changes ahead of or after the company’s fourth quarter earnings report. 

If you are interested in learning more about Aurora Cannabis ahead of the fourth quarter earnings report, please send an email to support@technical420.com with the subject “Aurora Cannabis Delays Earnings” to be added to our distribution list. 

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Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

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