Aurora Cannabis Buys Stake in Growery; Shares Pop

Shares of Aurora Cannabis (ACB) jumped nearly 10% Monday after the company announced that Aurora Nederland B.V., a wholly owned indirect subsidiary of the company, has acquired a significant stake in Growery B.V.

The Netherlands-based company is one of the few license holders allowed to participate in the Controlled Cannabis Supply Chain Experiment (CCSC). (See Insiders’ Hot Stocks on TipRanks)

Aurora to Provide Secured Loan

The deal is structured in such a way that Aurora intends to invest an immaterial cash amount of which part is due and payable upfront, and the rest is dependent on the achievement of certain milestones by Growery.

Aurora will also provide a secured loan to Growery to build a facility, finance initial operations, and provide technical and operational support through its Netherlands-based research center for medical cannabis.

Aurora Cannabis CEO Miguel Martin said, “Our investment in Growery is a significant advancement for our global recreational cannabis strategy. The Netherlands is expected to be the largest federally regulated recreational market outside of Canada, and is a proof point that our medical market success in Europe is portable to recreational markets. Aurora’s global leadership is underscored by a proven track record of regulatory compliance, testing, and commitment to science.

“With similar values and commitment to excellence, we are pleased to be working with Growery to enter the Dutch market.”

The CCSC is being used by the Dutch government to see how cannabis can be legally supplied to coffee shops and what the effects would be. The CCSC is expected to be in force for at least four years, during which the Dutch government will assess whether CCSC rules need to be extended nationwide.

Wall Street’s Take

Last month, Cantor Fitzgerald analyst Pablo Zuanic maintained a Hold rating on the stock but raised its price target to C$9.50 (from C$8.30). This implies 4.9% upside potential.

The rest of the Street is quite pessimistic on ACB with a Moderate Sell consensus rating based on five Holds and four Sells. The average Aurora Cannabis price target of C$7.58 implies 16.1% downside potential to current levels.

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