Aurora Cannabis ( TSE:ACB) has had a rough start to 2020, with analyst after analyst taking hits at the struggling stock. A variety of factors are to blame for this, both within and outside the companies control, however what is for certain is the risks now associated with the company due to its $1.00 price range. Because of this, the company is at high risk of being taking off the national stock exchanges to be listed on the over the counter markets as a penny stock. If this happens, the outlook is even more uncertain due to the fact that stocks that are down-listed will have a harder time up-listing within a year of its down-listing.
The company has obtained an estimated hold proposal from a large number of brokerage firms, with the aim of securing a large financing deal to control its debt and secure the funds needed to continue operations.
According to WSJ, Aurora Cannabis Inc. (ACB) obtained an estimated Hold proposal from the 20 brokerage firms currently keeping a deep eye on the stock performance as compares to its rivals. 3 equity research analysts rated the shares with a selling strategy, 13 gave a hold approach, 2 gave a purchase tip, 1 gave the firm a overweight advice and 1 put the stock under the underweight category.
The other option which is appearing to be more and more possibly is a Chinese merger. As reported earlier, Aurora Cannabis ( TSE:ACB) appears to to be a suitable candidate due primarily to its financial difficulties, and management unrest. This ticks both boxes Chinese investors are looking for. A top brand-able name, at a discount.
Aurora is the only Canadian marijuana company to launch two billion-dollar takeovers. To secure both, it has relied on the same playbook: Privately negotiating with its targets’ largest shareholders, rather than going after highly sought after directors. Now reports are showing that a number of Chinese companies are looking at US-Canadian backed Cannabis companies to buy, or to acquire significant share positions within the company, to help expand their own operations in North America, due to China’s draconian cannabis laws.
To compare to the other end of the spectrum in terms of debt-revenue convergence, a Stem-Cell and Cannabiniod Research company StemSation International (OTC:STSN) Released after hours on Friday that they company has confirmed to shareholders that it will not be doing a Reverse Split and will not increase the number of authorized shares. This is a significant announcement since the companies float is now updated as only 1.1 million, with a share price of $0.15. The idea for this company is to be listed on a national stock exchange. Since they will not be doing a reverse split, the company plans to get the price to over the mandatory $1.00 per share price for the up-listing process to begin.
Ray C. Carter Jr., StemSation President, CEO and thirty-year industry veteran, commented,
“We are very pleased to have officially opened our doors in the U.S. and Europe. We’re gaining the attention and interest of many global industry professionals at the corporate level and in field leadership with our innovative company.” See https://www.youtube.com/watch?v=rmTyJ7xtbHM.
Taken together, if ACB continues its downtrend, they will be notified that they have 6 months to satisfy to continuity requirements of the stock listing. However, 6 months is little time to secure a large financing deal, so the time is now for the company if they are to turn the ship around. At this point, they have 2 options. Secure a significant financing deal, or open up to Chinese involvement.