Aurora Cannabis Inc (ACB)

[Rowdy2]

I agree, I don't think that they will be in a position to do this for a while. It will be difficult for ACB to buy back in the medium term an amount of shares that would make a difference for shareholders.

With approximately 1 billion shares outstanding, you would probably need to see them buy back at least 10% of the shares, which would amount to 100 million shares, to make a difference for shareholders. At the current market price of $6.81 CAD - and they would usually buy back the shares at a premium to entice shareholders to sell, say $8.50 - it would cost ACB $850 million cash to buy these shares back. ACB currently has $500 million in cash and cash equivalents on its balance sheet, but they need that working capital to pay for daily operations, etc. They could borrow the money to buy back shares, but I am not sure if management would deem this wise in their expansion phase.

Great point about the Mexican acquisition - ACB will likely issue new shares to pay for this acquisition (as it has done with most of its acquisitions in the past), which will further dilute its ownership base. So as we saw with all the previous acquisitions in the past, we will likely see a decrease in share price right after the acquisition due to the increase in shares outstanding. This is frustrating for current shareholders.

Another point that I will add is that as ACB continues to rapidly expand, one of the challenges will be to integrate those new operations into existing operations, align supply chains, ensure quality control, etc. This does pose risks as if there are quality issues, it can damage ACB's brand or result in expensive recalls. Being big doesn't necessarily mean being better, and consumers will discover which products from different companies they prefer and will go with those.

ACB will also need to be aware of its all in productions costs for cannabis and continue to drive those down in order to remain profitable as the retail price for the recreation market in Canada could decline as provinces attempt to stamp out the black market.