The mid-November spike that sent Aurora Cannabis (TSE:ACB) up by almost three-fold proved short-lived. After speculation that the Democratic win in the U.S. elections would benefit cannabis companies, ACB stock promptly fell. Aurora took advantage of the stock jump by selling shares. And why not?
Aurora is burning money every quarter and needs cash. The $150 million cash raise not only hurts its investors but will undermine their trust.
On Nov. 9, the company posted an adjusted EBITDA loss of $57.9 million. Revenue fell 1% sequentially. It is not cash flow positive, even though its CEO, Miguel Martin, said it would take the necessary steps to get there. The company burned $142.7 million in Q1/2021. So, the adjusted gross margin of 48% will not mean much.
Excluding the Nordic 1 ramp-up costs to lift the gross margin to 52% also means very little. The company will keep losing cash and will need to sell shares again in the future.
Investors should stay away from this cannabis firm. Both Canopy Growth (NYSE:CGC) and Cronos (TSX: CRON) have big investors that will lend it support if it needs it.
After Aurora reverse split shares 12:1, investors should continue to avoid this stock. If the stock rallies again, use the opportunity to sell shares.
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