When it comes to cannabis companies, the tendency is to think they’re all microcaps or small caps at best. That’s not true as some of the more established companies in the space are commanding strong valuations, including Aurora Cannabis (TSX: ACB) with its $1.1-billion market capitalization and corporate coffers flush with nearly $160 million in cash and cash equivalents (all figures in Canadian dollars) as of the end of the June quarter.
The Vancouver-based company has maintained an aggressive inorganic and organic growth strategy to continue growing its footprint as one of Canada’s biggest licensed medical cannabis producers. To that end, Aurora has inked an agreement to provide itself more capital to fund expansion.
On Tuesday, Aurora said it struck a deal with a group of underwriters led by Canaccord Genuity (TSX: CF) to provide an additional $50.1 million via a bought financing. Per the agreement, the underwriters have agreed to purchase 16.7 million units of Aurora at a price of $3.00 per unit.
At the time of announcing the round, shares of ACB were trading at $3.03 per share. Each unit consists of one common share of ACB and one warrant to purchase an additional share of ACB, exercisable at $4.00 over 36 months from the time of closing the offering.
The agreement also includes an "over-allotment option" granting the underwriters the right to purchase up to 2.505 million additional units under the same terms, bringing the total aggregate gross proceeds to $57.615 million if the whole over-allotment option is exercised.
The company says it will have a post-funding cash position of more than $175.0 million, funds allocated for expansion and general working expenses.
Aurora chief executive Terry Booth says that the funding will allow the company to have the "financial horsepower…to keep going full throttle" with its efforts to capitalize on attractive growth opportunities domestically and internationally.
Since going public and trading as low as $1.79 in October 2016, Aurora has been volatile, as is typical with most companies in the cannabis space. Shares peaked at $3.95 last November before sinking to $1.96 in December and then catapulting back up to $3.48 in April.
That was followed by a skid back to $1.90 in June, with shares steamrolling ahead again to as high as $3.19 on Friday before closing at $3.03. Shares have sunk a little lower in Tuesday trading to $2.96, as traders are demonstrating only a minimal reaction to the fresh influx of cash.
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