Shares of Aurora Cannabis (NYSE :), (TSX 🙂 🙂 last week lost 4.58% to close last Friday at US $ 4.04 (C $ 5.84). But that is only part of the story.
The share of the Canadian cannabis company made a turbulent roller coaster ride last week and reached US $ 3.85 (C $ 5.12) last Wednesday, a drop of 14.5%, before making it up again. It then moved south again yesterday and closed 6.59% at US $ 4.11 (C $ 5.47).
Last week's uphill climb was caused by the release of Aurora last Thursday from an update on its global operations and growth initiatives. Said CEO Terry Booth:
"Aurora takes its leading position in the global cannabis industry seriously and strives to be open and transparent with all our stakeholders."
"The Aurora team is working on several important strategic initiatives in Canada, the United States and abroad to further strengthen the global position of Aurora."
The update provided a comprehensive overview of the newest movements of the cannabis giant, especially with regard to its continuous expansion in Western Canada and Denmark, as well as operational overviews of its activities in Quebec, Ontario, the US, Lithuania, Latvia, Estonia and Latin America. It also gave an overview of deals and agreements for export to the UK, Poland and Australia.
In total, Aurora is active in 25 countries around the world.
Aurora Cannabis price chart
One could argue that the update was necessary to tackle the bleeding of the stock since Sept. 11, when it went from US $ 6.49 (C $ 8.54) to US $ 3.85 (C $ 5.12) on October 2, a decrease of 37.7% on the day before the update was released. The update statement was certainly successful: the stock immediately turned around and rose to US $ 4.51 (C $ 6.01).
But has anything really changed?
The most important factor that caused the downward trajectory has not been erased from the books. And that factor was the disappointing fourth quarter of the Edmonton-based company.
These results were worrying for two reasons: they did not meet analysts' expectations, but perhaps more importantly, they did not meet the company's revised guidelines that had been cut just a month more. And since the company is aiming for the release of the next quarter in a month, investors will look at their earnings.
But given the scale of the company's ongoing expansion, they may also look at another important measure: debt. And, more precisely, how his debt relates to other players in the sector.
Aurora has approximately $ 250 million (C $ 322.5 million) in net debt. And given the long list of ongoing expansion projects, it is not surprising.
Various projects are being worked on, including a 1.6 million square foot Aurora Sun facility in Medicine Hat, Alberta; a 1 million square foot Nordic Sky facility in Odense, Denmark; construction of a growing facility in Whistler, B.C.; and construction of an innovation center in Comox, B.C. The new headquarters for subsidiary Anandia Laboratories, a test facility, would be opened today in Vancouver.
With all that expansion, it is not difficult to predict that his debt will continue to increase. For comparison, other majors in the industry such as Canopy Growth (NYSE :), (TSX 🙂 and Quebec-based Hexo (NYSE :), (TSX :), have cash on their balance sheet.
All companies in the sector are under pressure to increase their turnover, but for Aurora the pressure will be much more acute because of the heavy debt. It unveils its next income report on November 11.
HEXO CFO resigns
The financial director of HEXO Corp., based in Québec, announced his resignation last Friday, about four months after taking on the role.
In a statement, Michael Monahan said that he is resigning because the job requires him to spend most of his time in the Capital Region, which is "not currently possible for me because of the needs of my family."
The news was greeted yesterday with a fall in stock of more than 6%.
Stephen Burwash, the vice president of Strategic Finance, has been named as a replacement for Monahan.