Just read this article...there were also positives but they seemed more hopeful than anything...I'm getting a little nervous about Aurora...maybe because I got stung by Namaste. Not sure if I should just take the loss and move on....anyone know anything positive about this company? Shares are moving sideways and Terry Booth doesn't seem to be doing much other than diluting shares.
Three arguments why Aurora will send its investors to the poor house
Of course, there are two sides to every argument. Here's a look under the hood at why Aurora Cannabis may not be such a blazing-hot buy.
To begin with, it's a company that's been blessed with a couple of quarters of profitability due to one-time benefits, but that's been losing money hand over fist on an operating basis. As an active acquirer and company that's aiming to expand overseas, Aurora's expenses to construct and retrofit greenhouses, and establish overseas sales channels, are immense. Mind you, this doesn't include growing costs for sales and marketing, the addition of new employees, and the ongoing focus on branding and innovation. In other words, it could be some time before Aurora Cannabis is generating a meaningful per-share profit, and an operating profit without the aid of one-time benefits.
Secondly, Aurora Cannabis remains in the shadows in the partnership department. Whereas Canopy Growth landed a $4 billion equity investment from Constellation Brands, Cronos Group snagged a $1.8 billion equity stake from Altria, and HEXO formed a joint venture with Molson Coors Brewing, the largest producer by peak output is still by itself in the corner. There were reports that Coca-Cola was interested in a partnership or possible equity stake in Aurora this past September, but a deal was never reached. Without a brand-name partner with a keen marketing prowess, Aurora could struggle to gain the same validity as its peers.
Third and finally -- and you knew this was coming -- there's the ongoing share-based dilution. Until recently, pot stocks have had minimal or no access to nondilutive forms of financing, such as lines of credit or bank loans. Instead, they've often turned to bought-deal offerings, which involve selling common stock, convertible debentures, options, and/or warrants to raise capital to undertake their expansion strategy. While these offerings are successful, they also wind up ballooning a company's outstanding share count, which weighs on existing investors and pushes down the earnings per share of profitable companies. Aurora's outstanding share count is now just a stone's throw from 1 billion when it was at 16 million less than five years ago.
AI
