Aurora Cannabis Inc (TSX:ACB) shareholders agreed to go ahead with the deal to acquire CanniMed Therapeutics Inc (TSX:CMED) this week, clearing the way for the two companies to become one as Aurora looks to position itself as the market leader in the industry.
While Aurora has gotten bigger, the big question is whether it has gotten better. At over $1 billion, the company placed a high value on CanniMed, a company that generated sales of just $15 million in the past four quarters, and with no profit to show for. However, high valuations are nothing new to the cannabis industry, and Aphria Inc (TSX:APH) proved that when it entered into an agreement to purchase the relatively unknown Nuuvera Inc (CVE:NUU).
The one advantage cannabis giant Canopy Growth Corp (TSX:WEED) still has on Aurora is the strategic partnerships and agreements that the company has been able to secure in the past 12 months. Multiple supply deals and key strategic partnerships have helped position Canopy Growth for success when legalization inevitably takes place in Canada later this year.
Aurora is still a very expensive stock, and it still needs to show a lot more before investors anoint it as the premiere stock in the industry. In the past month the stock’s returns have been flat as the hype in the industry has cooled off a bit. Ultimately, I’d expect that share prices will gain some momentum once we see a firm date for marijuana legalization as that’s when interest in pot stocks will likely pick up again.
