Most major cannabis companies are continuing to expand aggressively – whether through mergers and acquisitions or otherwise – as they seek to consolidate their existing advantages going into 2019.
Aurora Cannabis Inc (NYSE: ACB)(TSX: ACB) announced today that it had finalized their previously announcement convertible note offerings due in five years. The bonds, which would raise around USD $300 million in cash, would bring a substantial cash influx to the company as it seeks to expand both domestically in Canada as well as internationally.
The bonds will bear a semi-annual cash interest rate of 5.5 per year, while the conversion rate for the notes is equal to 138.37 shares per $1,000 – a rate of $7.23 per share. This rate is currently a 10 percent premium on yesterdays closing share price on the NYSE.
The company plans to use the funds raised in other to further fuel their expansion efforts in both Canada and internationally. Aurora has been among the leading companies in the cannabis industry for sheer M&A activity. Some of the most notable past acquisitions include the purchase of CanniMed Therapeutics for CA $852 million and the more recent ICC Labs acquisition in South America for around CA $290 million. The largest of which, however, was Aurora’s all-stock deal to purchase MedReleaf valued at $2.5 billion, which still remains one of the largest acquisitions in cannabis history to date.
However, some regard this strategy of rapid expansion fueled by all-stock purchases and convertible notes to be costly for shareholders in the meanwhile. As Auroras outstanding share count continues to grow in light of these strategies, there is a tendency for the value of all shares held by existing investors to get weighed down. Looking at Aurora’s market capitalization, despite the fact it has risen by 67 percent, the share price has decreased 19 percent overall during the same period. A ballooning share pool will also make it harder to generate decent per-share profit figures. Back in 2014, Aurora had 16 million shares; now it has over 1.1 billion.
In response to the news, Aurora shares dropped around 6 percent by midday trading, before settling at a 2 percent loss. In comparison, the Dow Jones did the opposite, jumping 500 points or 2 percent.
Aurora Cannabis Inc Company Profile
Headquartered in Edmonton, Alberta, Canada with funded capacity in excess of 500,000 kg per annum and sales and operations in 21 countries across five continents, Aurora is one of the world’s largest and leading cannabis companies. Aurora is vertically integrated and horizontally diversified across every key segment of the value chain, from facility engineering and design to cannabis breeding and genetics research, cannabis and hemp production, derivatives, high value-add product development, home cultivation, wholesale and retail distribution.
Highly differentiated from its peers, Aurora has established a uniquely advanced, consistent and efficient production strategy, based on purpose-built facilities that integrate leading-edge technologies across all processes, defined by extensive automation and customization, resulting in the massive scale production of high quality product at low cost. Intended to be replicable and scalable globally, our production facilities are designed to produce cannabis of significant scale, with high quality, industry-leading yields, and low per gram production costs.
Each of Aurora’s facilities is built to meet EU GMP standards, and its first production facility, the recently acquired MedReleaf Markham facility, and its wholly owned European medical cannabis distributor Aurora Deutschland, have achieved this level of certification. – Aurora