Aurora Cannabis (ACB) Makes a Big Announcement and it’s Shares Plummet
Investors in Aurora Cannabis (ACB – Get Rating) can’t catch a break.
Aurora Cannabis’ stock was rallying at the beginning of this week off of news that the company had licensed their third EU-GMP facility and following a two-month suspension of medical marijuana sales in Germany, its products are once again available for sale.
That rally ended on Thursday when shares of Aurora Cannabis started to fall and eventually the stock was halted.
It was then announced that Terry Booth, the CEO of Aurora Cannabis at the time would be stepping down. He will be replaced by Executive Chairman Michael Singer on an interim basis. Booth reportedly will remain on the board.
This news comes less than two months after Aurora Cannabis announced the departure of Chief Commercial Officer Cam Battley, who was viewed as the face of the company and a potential successor to Booth.
This was not much of a surprise to those following Cantor Fitzgerald analyst Pablo Zuanic, who called for further management changes in the form of a new CEO for. Zuanic believes that a new CEO that operates with tighter financial constraints will be able to get Aurora Cannabis back on the correct path and bring confidence back into investors.
It was also announced that the company will cut 500 full-time staff positions which equates to about 17% of its workforce. In the statement they disclosed that in the summer of 2019 it had 2,779 employees, and they had grown their workforce 3,000 workers by the fall.
For the quarter coming up, the company plans to record asset-impairment charges of C$190 million to C$225 million and write-downs of C$740 million to C$775 million. Aurora Cannabis finally said that they would bring capital expenditures under C$100 million for fiscal 2020 in a push towards profitability.
They also mentioned that there would be large cuts in the valuation of some assets that the company expects to recognize when it reports fiscal second-quarter 2020
The stock sank in after-hours trade to finish down over 13%. This comes just two business days before Aurora Cannabis is set to report fiscal second-quarter earnings.
In the short-term, the news today is definitely troubling. However, the company is promoting that this as the prudent steps needed to strengthen the company in the long run.
Aurora Cannabis’s CFO Glenn Ibbott said, “We believe that the long-term opportunity for Aurora remains very compelling, despite a slower-than-anticipated rate of industry growth in the near-term.” Ibbott continued, “We also believe our approach to rationalizing the business and conservatively improving our balance sheet positions Aurora in a more stable position for sustainable growth going forward.”
My opinion is that investing in Aurora Cannabis is a high risk/high reward scenario at this time. Though it’s positive that this struggling Canadian cannabis producer is taking action to try and find a path to profitability, only time will tell if they can succeed.
(Disclosure: The author owns shares of Aurora Cannabis)
ACB shares . Year-to-date, ACB has declined -7.41%, versus a 3.77% rise in the benchmark S&P 500 index during the same period.
Author: Aaron Missere