Aurora Cannabis (NYSE:ACB) announced September four that it sold its 10.five% stake in Green Organic Dutchman Holdings (OTCMKTS:TGODF) for gross proceeds of CAD $86.five million or CAD $three a share. Owners of Aurora Cannabis stock will be pleased to understand the sale resulted in a 50% internal price of return.
In addition, it nonetheless holds warrants to acquire one more 16,666,667 shares of TGODF that are exercisable at $three share. With the stock at present trading about $three, it is going to be a whilst just before ACB could money in these warrants.
In the meantime, Aurora has far more than $40 million in pre-tax income to place to operate. Here’s exactly where I believe the owners of ACB stock will get the most bang for their buck.
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These Pretzels Are Creating Me Thirsty
I couldn’t resist the Seinfeld reference but the one particular region exactly where Aurora has been slow to the celebration is in the cannabis-infused drinks marketplace.
Positive, it will not be in a position to legally sell these drinks in its Canadian residence marketplace till mid-December of this year, but that is left it with a lot of time to organize a game program for the drinks marketplace. It is disappointing that it hasn’t.
As an alternative, Aurora is going to concentrate on vape pens and concentrates for its development beyond the dried flower.
“You’re going to begin seeing individuals shift more than from the illicit marketplace, the minute vape pens turn into accessible. And we have a head begin on that,” Aurora Chief Corporate Officer Cam Battley stated in June.
Offered the current overall health issues about vaping that have cropped up in 16 U.S. states suggests that the failure to have a backup program could hurt Aurora in the close to term. Lengthy term, I’m confident the vaping troubles will get sorted, but there is absolutely far more investigation to be completed.
Nevertheless, Aurora’s lack of cannabis-infused drinks is a significant cause why I’m (pardon the pun) higher on each Canopy Development (NYSE:CGC) and Hexo (NYSE:HEXO), whose Major Alcohol partners bring information and distribution capabilities to the table, creating them eye-catching cannabis investments in my opinion.
Do not get me incorrect. There’s a lot to like about Aurora. Here’s what I stated about it in August:
“Aurora Cannabis continues to use its business-top size in each Canada and abroad to capture a significant portion of the worldwide cannabis marketplace. The reality that it does not have a U.S. enterprise program at the moment does not imply it will not enter the marketplace in the future.”
“Furthermore, whilst it does not have a massive strategic companion, if it continues to implement revolutionary tips such as cultivating outdoors, I do not believe it will have a trouble attracting a massive strategic investor.”
Why Not Companion With Coke?
Back in 2018, Aurora held talks with Coca-Cola (NYSE:KO) but these seemed to have fizzled out.
Nevertheless, the reality that it recruited billionaire Nelson Peltz, whose Trian Fund Management has quite a few higher-profile customer goods investments, to assistance guide the organization via its ongoing development suggests that it could possibly reconsider a partnership with a organization such as Coke in the future.
In my opinion, the owners of Aurora Cannabis stock would be properly served by the organization reconsidering its stance on cannabis-infused drinks. I can say with certainty that my age group (mid-50s) are far far more inclined to attempt THC/CBD drinks or edibles than they are vapes or dried flower.
If you haven’t smoked cigarettes your complete life or for several years, why would you begin with weed? You wouldn’t.
The Bottom Line on Aurora Stock
You can not be all items to all individuals. That I get. So, it tends to make sense that Aurora’s focused its efforts on goods that have completed properly in the U.S. states exactly where recreational pot is legal.
Nevertheless, tastes can adjust. Couple of have delivered cannabis-infused drinks that taste great. If Canopy or Hexo can break via that barrier, I’m confident they’ll roll these drinks out across the U.S. as far more states and the feds legalize pot.
In the meantime, all Aurora can do is hope that they do not. A improved program would be to join the celebration. It is got 40 million causes to do so.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
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