Aurora Cannabis (TSX: ACB) (NYSE: ACB) has officially entered penny stock territory. The Alberta-based cannabis cultivator saw its shares close at $0.95 on the New York Stock Exchange in the regular session of the day, down 18.89% on the day, after dropping as low as $0.90 earlier in the session.
Closing below $1.00 on a US exchange is a first for the Canadian cannabis cultivator who first listed on the exchange on October 23, 2018. In the time since, the company has seen its share price crater as the cannabis bubble deflated as operators were expected to hit unattainable guidance.
The latest share price poses a problem for Aurora, in that it is now in violation of an exchange requirement to keep the price of its equity above US$1.00 per share. If the closing price of the equity remains below $1.00 per share for a period of 30 days, it becomes a candidate for delisting by the exchange. As has been alluded to by several outlets as of late, the company is now at risk of either delisting or taking the option of performing a share consolidation which rarely benefits shareholders.
The firm currently has one of the most bloated share structures within the entire sector, with approximately 1.16 billion shares currently outstanding as of December 31, 2019. The massive share structure is largely a result of oversized M&A activity that was conducted largely in common shares of the issuer. Also impacting the share structure is an ongoing at-the-market offering being conducted by the firm to generate funds for its operations. In the first two quarters of fiscal 2020, the company as a result has seen its share count balloon by 14.8%, with over 150 million new shares being issued.
The result, is that despite being now considered a penny stock, the issuer still has a market capitalization of over US$1.1 billion based on this evening’s closing price. A valuation which many still regard as being high given the firms current financial health which includes declining revenues and massive writedowns.
Aurora Cannabis last traded at $0.95 on the NYSE.
Information for this briefing was found via Sedar and Aurora Cannabis. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.