With the cannabis sector in the middle of earnings season, several industry leaders have reported results that have missed expectations from broker-dealers.

2022 has been a challenging year for the cannabis sector and we have been surprised by the size of the pullback so far. We believe that 2022 is a make or break year for many cannabis companies and are of the opinion that selectivity is more important than ever. As a result, we continue to work to identify operators that possess the characteristics that are required of a leader in a rapidly evolving industry.

Aurora Cannabis Inc. (Nasdaq: ACB) (TSX: ACB) is a Canadian Licensed Producer (LP) which was once considered to be a potential industry leader. From expanding too quickly to acquiring overvalued cannabis businesses, the company failed to execute on a multi-national growth strategy and the market has punished it for its failures.

Last week, the Canadian LP plunged almost 40% lower after announcing a $150 million bought deal financing of units (comprising one common share and one common share purchase warrant) for $2.45 each. The financing was priced at a considerable discount to the closing price on May 26th and we were not surprised by the market’s response.

After Friday’s decline, Aurora Cannabis is trading below the pricing of the financing and we will be monitoring the trend from here. Despite the market’s initial negative response to the transaction, the Canadian cannabis producer increased the size of the financing to $150 million from $125 million.

According to the press release, the Canadian cannabis producer plans to use the net proceeds of the offering for general corporate purposes. Based on Aurora Cannabis’ track record, we are not confident with the management team’s ability to use the proceeds in ways that create value for shareholders. The types of expenses that can fall under the general corporate purpose bucket is vast and we will monitor how the business advances with the capital infusion.

Aurora Cannabis is one example of a North American cannabis operator which has failed to live to the hype. Over the next month, we will issue a series of articles on cannabis businesses to avoid in the back half of 2022 and want our readers to be aware of the operators that will be highlighted in it.

If you are interested in learning more about Aurora Cannabis or other North American Cannabis Operators, please send an email to support@technical420.com with the subject “Aurora Cannabis” to be added to our distribution list.

Authored By

Michael Berger

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.