When investors in the cannabis sector look back on 2020, the picture they see will not be beautiful. Marijuana growers were already juggling a number of challenges – and then COVID-19 struck. The global pandemic is pushing a number of cannabis companies to the tipping point. But not all of them.
The difference between the two is now becoming more apparent. It all comes down to cash.
The amount of money these companies have on their balance sheets could very well be the factor determining whether cannabis companies will survive until the end of the crisis and then the year, or whichever comes first.
Aurora Cannabis
If you need proof of this theory, look no further than what happened with Aurora Cannabis (NYSE :), (TSX 🙂 on Monday.
The Edmonton-based marijuana company saw its share price fall by more than 13% to US $ 0,760 on the New York Stock Exchange and C $ 1,060 on the S & P / TSX Composite after it released a public update on its liquidity with an announcement the board of directors has approved a reverse stock split to prevent the company's shares from being removed from the us market. The move would consolidate all of its outstanding ordinary shares on a one-to-12 basis.
Aurora Cannabis Weekly Chart
"The company expects the consolidation to restore compliance with NYSE stock exchange standards and provide access to a wide universe of investors, access to equity and trade liquidity," the statement said.
The statement continued that Aurora will release a new prospectus to raise additional $ 350 million ($ 41.7 million) in a new "at-the-market" offering, an action that "would further strengthen the balance sheet and maintain flexibility given macroeconomic uncertainty caused by COVID-19. "
While the company is looking for more money, the company continues to increase its operating costs. Aurora said it is on track to meet the cost savings targets it set earlier this year when it announced the layoff of 500 workers and registered a $ 1 billion (C $ 1.4 billion) write-off.
The moves indicate a confession that it needs more money. The market reaction on Monday summed up investors' feelings about Aurora's attempt to maneuver its way into a stronger position. The market was not impressed.
Another fact mentioned in Aurora's update: The company reiterated that it currently has a total of C $ 205 million (US $ 147.6 million) on its balance sheet.
Others who work diligently
By comparison, other cannabis companies have worked hard to maintain a healthy cash balance.
Canopy Growth (NYSE :), (TSX 🙂 has one of the healthiest cash balances in the industry. The Ontario-based company was the largest marijuana grower by market capital and had C $ 1,561.6 million (US $ 1,124.6 million), according to the latest quarterly filing. The share price has risen by more than 48% since mid-March, when the impact of the global pandemic started to push up the stock markets.
On March 18, the New York stock closed for US $ 9.73. Yesterday, the session ended at $ 14.46.
Weekly Price Chart for Canopy Growth
Cronos Group (NASDAQ :), (TSX :), another Canadian company, has a cash balance of US $ 1,475.5 million (C $ 2,048.8 million). The shares rose from US $ 4.52 on March 12 to a close yesterday at US $ 5.79, a 28% gain.
In Aphria (NYSE :), (TSX :), cash on the balance sheet was C $ 497.7 million (US $ 358.4 million). The stock ended yesterday at US $ 3.47, up more than 8% on the day and nearly 63% since March 18, when it closed at US $ 2.13.
