Aurora Cannabis (NYSE: ACB) in April announced that over the next 25 months it intends to raise $750 million through a mixed-shelf offering. Aurora’s two top peers and competitors, Cronos (NASDAQ: CRON) and Canopy Growth (NYSE: CGC) have both secured global multi-billion investments. Cronos has nearly $2 billion while Canopy has in cash over $3 billion. Aurora has just $110 million in cash.
As an early investor in Aurora, my biggest questions are, “how will this impact my already diluted shares"? Can we anticipate further dilution? While Aurora is among the biggest marijuana companies globally, it needs the financial muscle to expand into the U.S. and other markets. Undoubtedly, they'll need more cash to continue at such a frenetic pace but - at what cost to shareholders?
Adding this $750 million will raise Aurora’s financial power to $860 million. This will enable Aurora to compete better with its peers – all of whom have much more capital firepower to deploy than Aurora. As at now, Aurora remains one of the top cannabis companies on earth which has yet to make a play at the U.S market.
In January 2019, Cam Battley, the chief corporate officer of Aurora hinted the company has plotted a "hemp-derived CBD strategy to enter the U.S. market over the next few months." Fast-forward to April, nothing has happened. This is likely due to the lack of resources to finance the expansion. This lack of resources is also the reason for the undervaluation of ACB stock.
Yes, Aurora certainly needs much more capital to continue to lead the race to the top and they shouldn’t have any trouble getting the funds. However, for those looking to invest in Aurora – you really should consider how this may impact presently diluted shares.
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