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

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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.