Aurora Cannabis Feels the Heat of Share Dilution; Analyst Weighs In, , on November 12, 2020 at 10:40 pm

By ILP
On 11/12/2020
In Financial News
Tags:

Investors’ pain can hardly have been more acute over the last 18 months than for those putting their trust in Aurora Cannabis (ACB). The nascent Canadian cannabis industry’s problems over the last year and a half have been well documented, and Aurora’s slide has been one of the more eye-catching descents.  November has been particularly volatile for investors. Joe Biden’s presidential win has brought with it almost certain marijuana reform at the federal level which will allow Aurora and fellow Canadian LPs to enter the U.S. market. Cannabis investors evidently liked this development- particularly Aurora investors – who sent shares up by a barely believable 153% over the past week.But what goes up usually goes down, and history has shown that is certainly true in Aurora’s case. The stock is sinking again after Aurora took advantage of the outsized gains by announcing it plans to sell more shares. On Tuesday, Aurora announced a $125 million share offering in order to raise much needed capital. At a price of $7.50 per unit, and consisting of approximately 16.7 million units, the sell will lead to dilution of at least 17% based on Tuesday’s closing price. With a notable history of share dilution, disgruntled investors were once again scurrying to the exit doors. But the latest development is hardly surprising, says Jefferies analyst Owen Bennett.The analyst had already argued the massive share gains were down to “a combination of retail FOMO and a short squeeze,” and anticipated Aurora might take advantage of the “inflated valuation.” And that is what the company has done. However, with the very real possibility of the U.S. market now opening up, Bennett says the move is a clever one.“Aurora is likely to get criticism for this move, one of the main bear points on the stock in the past being significant dilution,” Bennett said. “And while we agree it is a bit harsh on retail investors that bought into the stock in recent days, it is also a shrewd move. Aurora has current debt/lease obligations of C$141mn, US CBD represents a compelling opportunity, and there is also the possibility that the US THC market opens up sooner rather than later. For all of these the company needs cash.”Overall, there’s no change to Bennett’s rating which stays a Hold, while the C$6.9 ($5.28) price target remains, too. This figure implies a 25% downside from current levels. (To watch Bennett’s track record, click here)Wall Street backs Bennett’s caution here, as TipRanks analytics reveal ACB as a Hold. Based on 14 analysts tracked in the last 3 months, 12 rate the stock a Hold while 2 issue a Sell on the stock. The 12-month average price target stands at $21.00, marking a 19% upside from where the stock is currently trading. (See ACB stock analysis on TipRanks)To find good ideas for cannabis stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.,

Aurora Cannabis Feels the Heat of Share Dilution; Analyst Weighs InInvestors’ pain can hardly have been more acute over the last 18 months than for those putting their trust in Aurora Cannabis (ACB). The nascent Canadian cannabis industry’s problems over the last year and a half have been well documented, and Aurora’s slide has been one of the more eye-catching descents.  November has been particularly volatile for investors. Joe Biden’s presidential win has brought with it almost certain marijuana reform at the federal level which will allow Aurora and fellow Canadian LPs to enter the U.S. market. Cannabis investors evidently liked this development- particularly Aurora investors – who sent shares up by a barely believable 153% over the past week.But what goes up usually goes down, and history has shown that is certainly true in Aurora’s case. The stock is sinking again after Aurora took advantage of the outsized gains by announcing it plans to sell more shares. On Tuesday, Aurora announced a $125 million share offering in order to raise much needed capital. At a price of $7.50 per unit, and consisting of approximately 16.7 million units, the sell will lead to dilution of at least 17% based on Tuesday’s closing price. With a notable history of share dilution, disgruntled investors were once again scurrying to the exit doors. But the latest development is hardly surprising, says Jefferies analyst Owen Bennett.The analyst had already argued the massive share gains were down to “a combination of retail FOMO and a short squeeze,” and anticipated Aurora might take advantage of the “inflated valuation.” And that is what the company has done. However, with the very real possibility of the U.S. market now opening up, Bennett says the move is a clever one.“Aurora is likely to get criticism for this move, one of the main bear points on the stock in the past being significant dilution,” Bennett said. “And while we agree it is a bit harsh on retail investors that bought into the stock in recent days, it is also a shrewd move. Aurora has current debt/lease obligations of C$141mn, US CBD represents a compelling opportunity, and there is also the possibility that the US THC market opens up sooner rather than later. For all of these the company needs cash.”Overall, there’s no change to Bennett’s rating which stays a Hold, while the C$6.9 ($5.28) price target remains, too. This figure implies a 25% downside from current levels. (To watch Bennett’s track record, click here)Wall Street backs Bennett’s caution here, as TipRanks analytics reveal ACB as a Hold. Based on 14 analysts tracked in the last 3 months, 12 rate the stock a Hold while 2 issue a Sell on the stock. The 12-month average price target stands at $21.00, marking a 19% upside from where the stock is currently trading. (See ACB stock analysis on TipRanks)To find good ideas for cannabis stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

,

Contact Us

Please use our Instant Quote form to see if you're pre-qualified for a non-recourse stock loan, or if you have any questions or feedback, please email, call or chat with us.

deals@internationalliquiditypartners.com

+44 20 3994 1588

Headquarters: Hunkins Waterfront Plaza, Charlestown, Nevis

Open 24 hours a day / 7 days a week / 365 days a year

 

 

 

Frequently Asked Questions

What Is Securities-Based Lending?
Securities-based lending, or a stock loan, is the practice of using market investments such as stocks, ETF’s, warrants, bonds, or real estate investment trusts as collateral for a loan.
How much money can I get for my securities?
Borrow up to 80% of the value of your pledged investments giving you the capital you need to expand your business, purchase real estate, or tackle a costly project.
What happens if my securities lose value?
With a non-recourse stock loan, you can walk away from your securities at any time and keep the loan money with no negative credit consequences even if the investments lose value.
Is my information safe with ILP?
We pride ourselves on outstanding service and make client confidentiality our top priority. You can always be absolutely certain your information is safe with us.
How long does it take for the disbursement of funds?
Most of the transactions we process take less than 7 days from application to the disbursement of funds giving you cash quickly when you need it most.
What credit score do I need to qualify?
There are no credit checks or personal guarantees necessary with our services. Your pledged securities are the only collateral required for the loan you receive.

Instant Quote

Please fill out your information to see if you are pre-qualified.

Enter the Stock Symbol.

Select the Exchange.

Select the Type of Security.

Please enter your First Name.

Please enter your Last Name.

Please enter your phone number.

Please enter your Email Address.

Please enter or select the Total Number of Shares you own.

Please enter or select the Desired Loan Amount you are seeking.

Please select the Loan Purpose.

Please select if you are an Officer/Director.

International Liquidity Partners, LLC may only offer certain information to persons who are “Accredited Investors” and/or “Qualified Clients” as those terms are defined under applicable Federal Securities Laws. In order to be an “Accredited Investor” and/or a “Qualified Client”, you must meet the criteria identified in ONE OR MORE of the following categories/paragraphs numbered 1-20 below.

International Liquidity Partners, LLC cannot provide you with any information regarding its Loan Programs or Investment Products unless you meet one or more of the following criteria. Furthermore, Foreign nationals who may be exempt from qualifying as a U.S. Accredited Investor are still required to meet the established criteria, in accordance with International Liquidity Partners, LLC’s internal lending policies. International Liquidity Partners, LLC will not provide information or lend to any individual and/or entity that does not meet one or more of the following criteria:

1) Individual with Net Worth in excess of $1.0 million. A natural person (not an entity) whose net worth, or joint net worth with his or her spouse, at the time of purchase exceeds $1,000,000 USD. (In calculating net worth, you may include your equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities. Your inclusion of equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property.)

2) Individual with $200,000 individual Annual Income. A natural person (not an entity) who had individual income of more than $200,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year.

3) Individual with $300,000 Joint Annual Income. A natural person (not an entity) who had joint income with his or her spouse in excess of $300,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year.

4) Corporations or Partnerships. A corporation, partnership, or similar entity that has in excess of $5 million of assets and was not formed for the specific purpose of acquiring an interest in the Corporation or Partnership.

5) Revocable Trust. A trust that is revocable by its grantors and each of whose grantors is an Accredited Investor as defined in one or more of the other categories/paragraphs numbered herein.

6) Irrevocable Trust. A trust (other than an ERISA plan) that (a)is not revocable by its grantors, (b) has in excess of $5 million of assets, (c) was not formed for the specific purpose of acquiring an interest, and (d) is directed by a person who has such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of an investment in the Trust.

7) IRA or Similar Benefit Plan. An IRA, Keogh or similar benefit plan that covers only a single natural person who is an Accredited Investor, as defined in one or more of the other categories/paragraphs numbered herein.

8) Participant-Directed Employee Benefit Plan Account. A participant-directed employee benefit plan investing at the direction of, and for the account of, a participant who is an Accredited Investor, as that term is defined in one or more of the other categories/paragraphs numbered herein.

9) Other ERISA Plan. An employee benefit plan within the meaning of Title I of the ERISA Act other than a participant-directed plan with total assets in excess of $5 million or for which investment decisions (including the decision to purchase an interest) are made by a bank, registered investment adviser, savings and loan association, or insurance company.

10) Government Benefit Plan. A plan established and maintained by a state, municipality, or any agency of a state or municipality, for the benefit of its employees, with total assets in excess of $5 million.

11) Non-Profit Entity. An organization described in Section 501(c)(3) of the Internal Revenue Code, as amended, with total assets in excess of $5 million (including endowment, annuity and life income funds), as shown by the organization’s most recent audited financial statements.

12) A bank, as defined in Section 3(a)(2) of the Securities Act (whether acting for its own account or in a fiduciary capacity).

13) A savings and loan association or similar institution, as defined in Section 3(a)(5)(A) of the Securities Act (whether acting for its own account or in a fiduciary capacity).

14) A broker-dealer registered under the Exchange Act.

15) An insurance company, as defined in Section 2(13) of the Securities Act.

16) A “business development company,” as defined in Section 2(a)(48) of the Investment Company Act.

17) A small business investment company licensed under Section 301 (c) or (d) of the Small Business Investment Act of 1958.

18) A “private business development company” as defined in Section 202(a)(22) of the Advisers Act.

19) Executive Officer or Director. A natural person who is an executive officer, director or general partner of the Partnership or the General Partner, and is an Accredited Investor as that term is defined in one or more of the categories/paragraphs numbered herein.

20) Entity Owned Entirely By Accredited Investors. A corporation, partnership, private investment company or similar entity each of whose equity owners is a natural person who is an Accredited Investor, as that term is defined in one or more of the categories/paragraphs numbered herein.

Please read the notice above and check the box below to continue.

Nevis Office

Main Street
Hunkins Waterfront Plaza
Charlestown, Nevis

New York Office

Coming Soon!

Follow Us

Market Coverage