stock seems set for another double-digit drop on Wednesday after the company announced a proposed overnight offering of $125 million of shares.
The stock (ticker: ACB) soared after the company reported its September quarter earnings, extending a post Election Day surge to 136%. The vote provided a range of upbeat news about the expansion of cannabis sales in the U.S. But as analysts digested the report, shares fell about 26% on Tuesday, paring back the post-election gains to 75%.
The stock was down another 20% just before noon on Wednesday to $6.61. The company announced plans to sells units—one common share, and one half of a warrant to purchase a share, exercisable at $9—at a price of $7.50. The release describing the plan didn’t specify an offering date.
The company said final terms would be determined at the time of pricing. It plans to use the proceeds, if any, to fund growth opportunities, working capital, and other general corporate purposes.
Stifel analyst W. Andrew Carter lowered his rating on the stock to Sell from Hold following the announcement, though he raised his price target to 6.50 Canadian dollars (US$4.98). He said news of the offering validated his concerns regarding Aurora Cannabis’s cash position.
“We do not believe the company has demonstrated an enduring right-to-win for new market opportunities, particularly in the U.S., with the increasing competitiveness of the Canadian market challenging the company’s ability to achieve profitability while contending with liquidity issues,” Carter wrote.
Cantor Fitzgerald analyst Pablo Zuanic lowered his price target to C$12 from C$13, but maintained a Neutral rating.
He wrote that aside from the company’s outlook, the September quarter was disappointing in several ways, including a sales drop in Canadian recreational and medical cannabis, as the company lost market share in the recreational business. He also said margins and cash burn worsened.
Zuanic did note that the company’s new CEO Miguel Martin is beginning to pivot the company from value-priced pot to more premium offerings, which Zuanic thinks is starting to play out.
“The volatility notwithstanding, we think the relative valuation [versus other pot companies] leaves little downside,” Zuanic wrote. “We certainly do not blame management for making use of the steep post-election bump experienced by the stock.”
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