the stock sank on Monday after the Canadian marijuana firm announced plans to reverse stock split and renew the stock market.
The company’s board of directors approved a consolidation of the shares on a 12-to-1 basis, effective May 11. Currently, there are just over 1.31 billion common shares outstanding, which would be reduced to approximately 109.4 million shares. This reverse allocation occurs when Aurora shares (ticker: ACB) fell outside of New York Stock Exchange listing standards because its share price fell below $ 1 on average over a 30-day period. stock market.
Stocks fell 13% to 76 cents on Monday, while the S&P 500 was down 1%.
The company has announced drastic cost reductions such as layoffs and greenhouse sales. Founder Terry Booth resigned in February. At the time, the company told investors that it had promised creditors that it would make cash flow positive by the September 2020 quarter, with C $ 50 million (US $ 37.7 million). ) profit before interest, taxes, depreciation and amortization during the financial year 2021.
The company said on Monday it had approximately C $ 205 million ($ 147.69 million) in cash as of March 31. Aurora intends to file a new prospectus supplement for a new market share sale program, under which approximately $ 350 million remains available.
Aurora said it would use some of its new capacity to strengthen its balance sheet in a climate of macroeconomic uncertainty caused by Covid-19. Social distancing efforts have closed cannabis stores in Canada’s most populous province, Ontario, a place where Aurora had considered new stores to increase sales.
The company said it is still on track for the sale of materials, general and administrative cost reductions, significant reductions in capital spending and reduction in complexity across its organization. Net cannabis revenues are still expected to show modest quarter-over-quarter growth in the third quarter of fiscal 2020.
“Today we are still focusing on financial discipline across the organization,” said interim CEO Michael Singer in the release. “We are taking the appropriate steps to strengthen our cash flow and maintain our financial flexibility while navigating the current environment. As Aurora strives to generate positive free cash flow, we are confident that our shareholders will support our future actions to solidify our balance sheet and position the company for success. “
Cantor Fitzgerald analyst Pablo Zuanic models Aurora to use only a quarter of the new installation in the June and September quarters, which he says would amount to a dilution of about 5% to 6% for existing shares, based on average prices. Aurora is expected to transition to a positive free cash flow company at some point in fiscal 2021.
“We realize these are big assumptions,” he wrote, referring to the money to be collected and the price movements. “Still, confidence could return if the company can show significant improvement in cash consumption and EBITDA over the next two quarters. “
He maintained an overweight, although qualified to view it as a speculative purchase rating, given the uncertainty surrounding the business. He lowered his price target to CA $ 2.75 from CA $ 3.80.
Write to Connor Smith at [email protected]