With all the news regarding biotech stocks and oil price wars dominating headlines, Rich has had less time to focus on pot stocks. Today, however, some major cannabis stock news broke that Rich went live to address.
The news concerns Edmonton-based Aurora Cannabis Inc. (TSX:ACB) (NYSE:ACB), which has become something of a cautionary tale in the cannabis space. Last April, ACB stock was worth around $9.37. Since then, it lost about 90% of its value.
Will today’s news help Aurora get its business together to return some value in the long run? Or is this a sign that things will only get worse from here? Let’s find out.
Cannabis Stock News: Aurora’s 12:1 Reverse Split
Earlier today, as part of a general business update, Aurora Cannabis announced it will consolidate its outstanding common shares on a 12-to-1 basis. According to Aurora, the move is to “restore compliance” with the NYSE’s continued listing standards. This is because, in order to list on the NYSE, companies must keep their share price above $1.
The move, which will come into effect on May 11, may also help attract new investors. But that doesn’t mean the current investors will like it much.
“It kind of sucks for anyone holding ACB,” Rich explains. “But it might be better after the dilution, as the share price will rise. This might actually work for Aurora, believe it or not.”
The company also announced that, as of March 31, it has approximately $205 million in cash. This means it is relatively well funded to continue operations despite the macroeconomic uncertainties created by the COVID-19 crisis.
However, to help generate balance sheet strength and preserve flexibility, Aurora plans to file a new prospectus supplement. Finally, the company adds that it remains committed to reporting modest growth in net revenue between Q2 and Q3.
Does This Make Aurora a “Buy”?
As Rich noted, the reverse split may prove to be good for Aurora Cannabis in the long run. In the short-term, however, today’s cannabis stock news has brought ACB’s share price down.
The stock slid more than 15% today, from $0.88 to $0.74.
Aurora, like other cannabis stocks, has to deal with a unique set of problems due to the COVID-19 crisis. Both oversupply and falling demand are taking their toll on the industry, and ACB is no exception. What’s more, the company is still a considerable ways off from posting actual revenue.
If ACB maintains its current price by the time the reverse split takes place, the stock will be worth approximately $8.88. It’s likely not worth taking a position in Aurora before this, though it remains to be seen whether the stock will actually gain value post-split.
“I think Aurora has already proven to us that you can’t trust anything they say,” adds Rich. “They say they’re trying to be profitable, why don’t you tell us when you are profitable?”
What do you think of today’s cannabis stock news? Is Aurora doing what it needs to do for the long run? Or is it too little, too late for this once-promising company? Let us know your thoughts and, as always, keep watching RichTV Live.
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