Analyst: Aurora Cannabis’ dip into capital market after stock rally ‘shrewd’

Topics ranging from the role of small producers to global opportunities for Canadian companies, among others, were discussed at MJBizCon’s Passholder Days on Nov. 11. It’s all available to you on demand.

Underwriters for Aurora Cannabis’ previously announced overnight public offering have agreed to purchase roughly 20 million units at $7.50 apiece, the Alberta company said this week, a move that would net the company $142.4 million.

If the over-allotment option is exercised, the net proceeds would increase to $163.8 million.

Aurora said it intends to use the proceeds to fund growth opportunities, working capital and other corporate purposes.

Aurora’s stock had more than doubled in the days before the overnight offering, “not driven by fundamentals, but instead a combination of retail (fear of missing out) and hedge fund short squeeze,” Jefferies analyst Owen Bennett wrote in a note to investors.

Acknowledging the offering leads to further dilution of the company’s shares, Bennett wrote that “you also have to say it is a shrewd move, especially with the U.S. possibly opening up sooner vs. later.

“Without cash, getting a foothold in that market will be very difficult.”

Each unit in the offering consists of one common share and half of one share purchase warrant. The warrants will be valid for 40 months after the closing date.

The offering – expected to close around Nov. 16 – would eat into Aurora’s recently filed $500 million short-form base shelf prospectus.

Aurora was not alone in capitalizing on its rising shares this week.

New Brunswick-based Organigram Holdings announced an underwritten public offering of units for net proceeds of 57 million Canadian dollars ($44 million).

Net proceeds would rise to $69 million if the over-allotment option is exercised.

A syndicate of underwriters led by Canaccord Genuity agreed to purchase 32.5 million units at a price of CA$1.85 per unit.

Each unit consists of one common share and half of one common share purchase warrant.

The warrants are exercisable for a period of 36 months after the closing date at an exercise price of CA$2.50.

The offering is expected to close Nov. 12.

Organigram said it plans to use the proceeds to repay debt and for general corporate purposes.

Aurora trades as ACB on the Toronto Stock Exchange and the New York Stock Exchange.

Organigram trades as OGI on the Toronto Stock Exchange and the Nasdaq.

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One comment on “Analyst: Aurora Cannabis’ dip into capital market after stock rally ‘shrewd’
  1. John Hyde on

    Do you really think Aurora and OrganiGram are good investments? Besides the pop up to 13.00 for aurora (lasting about 24-36 hrs at most) its back down to about $7.00, with diluted shares, thanks in part to Stifel and hedge fund activity. Organigram is way down and still headed that way.
    There are a bunch other options that have been doing a lot better over the past year and others that have the potential to really pull ahead as US adult and med use continue to expand.
    For those who are hesitant to get into individual stks a good alternative might be MSOS, an ETF of US based holdings that has risen from a low of about $21.00 at the end of September to almost $30.00 today. (11/13). Pretty decent returns. Another attractive point is that MSOS is less volatile than many of the individual offerings so you don’t have to stay on top of your positions as much to stay current.
    I’m not knocking the Canadian MJ folks but they have a lot of settling out before they can start growing again. I’m all in favor of that happening, I still have some small core holdings in some of the Canadian companies but I feel the US market has more upside over the next 3 years or so. I was lucky to get into the MJ market back in the fall of 2016 and did well. Then started buying back select holdings this past July/August with very nice returns so far. I have 15-25% trailing stops for everything except small core holdings on most of them due to potential volatility as it served me very well over the past 4 years. But if you don’t want to watch that carefully then an ETF (like MSOS) is a great choice. In my humble opinion anyway.
    Cheers to a productive investing future, worldwide!

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