Aurora Cannabis Inc. (TSX:ACB) has not wavered in its pursuit of growth ahead of recreational legalization. The $3.2 billion acquisition of MedReleaf Corp. (TSX:LEAF) will make Aurora the largest cannabis producer in the world. However, the aggressive strategy undertaken by Aurora has some analysts scratching their heads, and shareholders expressing consternation over dilution.
Earlier this year Aurora completed its acquisition of CanniMed Therapeutics which was valued at $1.2 billion, at the time the largest takeover in the industry. At the time Aurora fell under fire for paying such a steep premium in order to chase pre-eminence in the cannabis market. According to leadership, the acquisition of MedReleaf offers access to its top line production efficiency. Aurora will also seek to more aggressively pursue global expansion.
Shares of Aurora were down 3.34% in early afternoon trading on May 16. The stock has plunged 18.8% in 2018 so far. Aurora has tabbed Bank of Montreal Nesbitt Burns as its financial advisor, but analysts are sounding the alarm over its financials going forward. Terry Booth, CEO of Aurora, was evasive when asked about the metrics his company was using to value the $3.2 billion takeover of MedReleaf.
Ahead of legalization the company will be looking to generate buzz over its growth potential, but the size of the cannabis market is still uncertain. According to Statistics Canada, Canadians spent $5.7 billion on cannabis in 2017 – 90% of which went to currently illegal recreational use.
