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Aurora Cannabis Continues to Destroy Shareholder Value with Equity Financing

Story Highlights

Aurora Cannabis has relied on equity financings to fund its operations for several years. This latest round of financing demonstrates that there is no path to profitability. Will ACB ever turn things around?

Aurora Cannabis (TSE: ACB) (ACB) produces, distributes, and sells cannabis products. It also produces and sells indoor cultivation systems and hemp-related food products.

The company announced that it will raise US$125 million through a bought deal financing led by Canaccord Genuity (TSE: CF) and BMO (TSE: BMO) Capital Markets. The deal is for 51.1 million units, with each unit made up of one common share and one warrant with the right to buy one common share at a strike price of US$3.20 per share. The units were purchased by the underwriters for a price of US$2.45.

Aurora Cannabis’ share price has been on a straight decline since March 2019, having lost roughly 98% of its market value from the peak. The company has failed to create any shareholder value as it continues to burn cash.

Indeed, the company has relied heavily on the sale of shares to continue funding its operations, resulting in major shareholder dilution over the past several years. This recent offering will continue to add to the share count, with no apparent path to profitability.

Investor Sentiment

Of the 524,105 portfolios tracked by TipRanks, only 0.6% of them have Aurora Cannabis as a holding. In the past seven days, these holdings were reduced by 0.5%. The number was even higher in the past 30 days, with a 1.4% reduction in holdings. The stock’s sentiment is negative and below the sector average, as demonstrated in the image below:

Analyst Expectations

Aurora Cannabis has a Moderate Sell consensus rating based on six Holds and three Sells assigned in the past three months. The average Aurora Cannabis price forecast of C$3.80 implies 9.4% upside potential.

Analyst price targets range from a low of C$2.50 per share to a high of C$5 per share.

Final Thoughts

Aurora Cannabis has been a falling knife for the past three years that has destroyed 98% in value. It has relied heavily upon equity raises to survive, which has caused massive shareholder dilution over the past several years.

The fact that it has raised another US$125 million in equity financing demonstrates that the company still has no clear path to profitability.

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