(Reuters) – Canada’s Aurora Cannabis Inc named billionaire investor … The appointment comes weeks after rival Canopy Growth Corp appointed …
(Reuters) – Canada’s Aurora Cannabis Inc named billionaire investor Nelson Peltz as a strategic adviser on Wednesday, sending the company’s U.S.-listed shares up 11 percent in trading before the bell.
FILE PHOTO: The Logo for Aurora Cannabis Inc., a Canadian licensed cannabis producer, is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 8, 2019. REUTERS/Brendan McDermid
The company has offered Peltz an option to buy about 20 million of its shares at C$10.34 a share, a small discount on the stock’s close of C$10.64 on Tuesday.
The stock option will vest ratably over a four-year period on a quarterly basis, Aurora said.
Aurora will tap into Peltz’s extensive experience in the consumer industry and work with him to explore potential partnerships that will expand the company globally.
“We look forward to working with Nelson to further extend our global cannabis industry leadership by aligning Aurora with each of the major market segments cannabis is set to impact,” said Aurora CEO Terry Booth in a statement.
The appointment comes weeks after rival Canopy Growth Corp appointed lifestyle guru Martha Stewart to help develop and launch a line of pot-based products.
Cannabis firms are also looking beyond recreational marijuana to drive sales, and the passing of the U.S. farm bill last year has opened the door for hemp, a cannabis plant with no or extremely low concentrations of “high” inducing THC.
Hemp can be used in foods, organic body care and clothing, among others.
Cannabis companies in Canada have been pouring cash into their businesses to fend off competition as well as develop new products, after the country approved the use of recreational marijuana in October.
“Canadian licensed producers, and Aurora in particular, are well positioned to lead in the development of the international cannabis industry,” said Peltz in a statement.
Peltz, who heads investment management firm Trian Fund Management, has waged battles against several consumer conglomerates, including a push for the separation of Kraft into Mondelez International and Kraft Foods Group in 2012. He won a board seat in Procter & Gamble Co in 2017 after waging what was the largest proxy fight ever.
Reporting by John Benny in Bengaluru; Editing by Shinjini Ganguli
Let’s take a deeper look at Aurora Cannabis (TSX:ACB)(NYSE:ACB) and CanopyGrowth Corp. (TSX:WEED) (NYSE:CGC) — the two biggest …
For investors, it’s really tough to know when a stock has reached its peak and when it’s bottomed out. For that same reason, it’s not easy to pick a marijuana stock when some players are doing so well and others are lagging behind.
But if you have a long-term perspective, this decision becomes much easier. Let’s take a deeper look at Aurora Cannabis(TSX:ACB)(NYSE:ACB) and Canopy Growth Corp.(TSX:WEED) (NYSE:CGC) — the two biggest marijuana stocks — to analyze their business potential and long-term value.
Canopy Growth is one of the few weed stocks with a solid foundation to grow its business and reward investors in the long run.
Canopy’s market size, capacity to ramp up production and diversity of product offerings make it a much stronger player. The company currently operates weed-growing facilities with over 2.4 million square feet of space.
But the producer has been expanding its operations quickly, which will deliver the potential to manage more than five million square feet of production space by next year. In the latest development, Canopy Growth acquired a hemp licence in New York State, as it plans to build an extraction and manufacturing facility.
One of the largest alcoholic beverage giants, Constellation Brands, last year raised its stake in the company to USD$4 billion, acquiring a nearly 40% stake in Canopy. Helped by these positive developments, Canopy Growth has surged more than 60% this year, outperforming its peers massively.
Aurora Cannabis has been in the headlines during the past one year due to its massive deal activity. The company bought MedReleaf Corp. and CanniMed Therapeutics last year, consolidating Aurora’s market position in the medical segment.
Aurora operates in 21 countries with a strong presence in the European Union. It expects its global medical cannabis business to accelerate significantly in the coming years. Aurora shares jumped more than 7% today after the company announced that billionaire investor Nelson Peltz is joining the company as a strategic adviser.
Peltz, whose New York-based Trian Fund Management LP has more than $10 billion under management, will advise Aurora on “potential partnerships with leading corporations,” the company said in a statement today.
“Nelson is a globally recognized business visionary with a strong track record of constructive engagement to generate accelerated, profitable growth and shareholder value across many verticals of great interest to us,” Aurora Chief Executive Officer Terry Booth said in the statement.
Both Canopy and Aurora are two top pot stocks that you can consider to keep in your portfolio. No doubt Canopy has had a very powerful rally in 2019 after posting 60% gains, but I still believe there is a further upside if the company continues on its growth path.
Aurora, on the other hand, has a much bigger short-term upside potential as the company looks for a strategic partnership with a top consumer brand. You can divide your investment equally between these two names to hedge your bets.
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Quebec cannabis giant HEXO Corp. is acquiring Newstrike Brands Ltd. … the top two players — Aurora Cannabis Inc. and Canopy Growth Corp.
Quebec cannabis giant HEXO Corp. is acquiring Newstrike Brands Ltd. — the Oakville-based mid-sized cannabis company backed by The Tragically Hip — in an all-stock deal worth $260 million, both companies announced early Wednesday morning.
The deal is the biggest yet to take place between two sizeable Canadian cannabis companies post-legalization in a crowded industry where the top two players — Aurora Cannabis Inc. and Canopy Growth Corp. — control just under 50 per cent of domestic recreational cannabis sales.
HEXO currently has a market value of almost $1.6 billion — the acquisition of Newstrike will increase the company’s distribution footprint from three to eight provinces, and potentially propel it to become one of the top four biggest cannabis companies in Canada, after Canopy Growth, Aurora, Aphria Inc. and Tilray Inc.
“We’re adding $55 million in cash to HEXO with this acquisition, and this is in line with our vision to be in the top 3 cannabis companies worldwide,” said Sebastien St. Louis, HEXO’s Chief Executive Officer.
“We started conversations last October, and it was a relatively quick process because our visions were aligned. We’re excited about Newstrike’s agreement with the Neal Brothers to create specialty products for the edibles market and so that joint venture will be integrated into this acquisition,” St. Louis explained.
Canada embarks on its second phase of legalization in a matter of months — cannabis edibles, beverages and concentrates are set to hit the recreational market this October.
HEXO’s revenues come largely from the Quebec recreational cannabis market — for its latest quarter ending Oct. 31, 2018, the company brought in a net revenue of $3.7 million, and shipped 952 kilograms of dried flower equivalents to the adult-use market, most of which went to fulfill its supply agreement with Quebec’s provincial distributor. The company sits on a 1 million square-foot greenhouse in Gatineau, Que. which yields over 14 tonnes of cannabis annually, according to corporate disclosures.
Newstrike currently has two cannabis facilities in Ontario — an indoor grow room in Brantford, and a greenhouse in Niagara. Both facilities are licensed to cultivate and sell cannabis for the recreational market under the UP Cannabis brand. Newstrike’s most recent quarterly report ending Sept. 30, 2018 showed that the company realized a revenue of just over $3.4 million to the adult-use market.
“We’ve always recognized that to become a dominant player in the Canadian cannabis sector we needed a strong partner,” said Newstrike CEO Jay Wilgar. “You look at our partnership with the Hip, with the Neal Brothers and then you look at HEXO’s partnership with Molson Coors… putting these two companies together makes an enormous amount of sense.”
HEXO is one of very few pot firms that have struck coveted deals with alcohol, tobacco and pharmaceutical companies over the last six months — Cronos Group announced a $2.4 billion investment from tobacco giant Altria Group last December, while Tilray Inc. partnered up with Swiss drug giant Novartis AG around the same time to develop and distribute medical cannabis.
Both Wilgar and St. Louis are confident that the merger of both companies will generate a combined revenue of $400 million by mid-2020.
“Everytime we have committed something to the market, we have delivered. We announced that by December 2018 we would have 1 million square foot up and running, and we met that promise and we got all our licenses in under a year,” St. Louis said.
Wilgar declined to elaborate on what his specific role would be post-acquisition, but maintained that he would continue to be actively involved in Newstrike.
HEXO’s stock price closed at $7.40 Tuesday evening, while Newstrike’s hovered at the $0.45 mark. The Quebec company’s acquisition of Newstrike is the second big transaction to take place between cannabis companies post-legalization — in December, Aleafia Health Inc. acquired medical cannabis producer Emblem Corp. for $173 million.
US Marijuana Market Warms Up to Merger Deals: ETFs in Focus … billion, per a January report by Arcview Market Research and BDS Analytics (read: …
Canada became the first major world economy and the second country after Uruguay to legalize recreational marijuana last October. The legalization seems to be largely priced-in at the current level. Investors’ interest has been turning toward the United States where the industry is still booming, way far to mature (read: Tilray’s Deal to Buy Hemp Food Maker Bolsters Marijuana ETF).
Cannabis is getting official approval from many U.S. states for recreational uses, in addition to medical usage. Though pot remains entirely illegal at the federal level, Michigan approved a ballot measure during the midterm elections for recreational use of marijuana to become the 10th state, while Missouri and Utah approved the legalization of medical marijuana. The total number of U.S. states greenlighting medical pot is now 33.
As an evidence of strong demand in the United States, pot companies have engaged in deals of late. Harvest Health & Recreation Inc. is acquiring closely held Chicago-based Verano Verano Holdings LLC for about $850 million in the largest U.S. pot deal, as reported by Bloomberg.
Inside Harvest-Verano Deal
Per the company, the joint entity will have licenses to operate up to 200 facilities in 16 states and territories, including 123 retail dispensaries. The will make it one of the largest multi-state operators in the United States. The deal would allow Harvest to have more than 70 operating dispensaries, 13 cultivation facilities and 13 manufacturing facilities by the end of 2019.
Verano’s strong retail brand offers 150 products that are sold in 150 retail locations, according to analysts at Cannacord Genuity. “Arizona-based Harvest will give Verano shareholders a combination of subordinate and multiple voting shares for a total estimated purchase price of $850 million based on a share price of C$8.79,” per Bloomberg. The deal is expected to be clinched in the first half of this year.
If completed, the acquisition will mark the largest deal between two U.S.-focused pot companies, according to data compiled by Bloomberg. Notably, Harvest is the third-largest U.S. cannabis firm.
“Land Grab” to Drive Marijuana Merger and Acquisitions in U.S.
These are not the first U.S. companies that are engaging in an M&A deal. In November, California-based cannabis retailer and producer MedMen had agreed to buy Chicago-based PharmaCann, a medical marijuana company, for $682 million (read: Why Marijuana ETFs & Stocks Have More Room to Run).
The idea is to grab land fast and have licenses to cultivate cannabis. Aurora Cannabis did the same thing in Canada by making several acquisitions in a short span.
Chicago: A Key U.S. State for Marijuana Business?
Chicago’s marijuana industry is booming. Since 2013, medical marijuana has been legal in the state Illinois. There are currently 17 companies that own licenses to grow and process the plant in Illinois, perChicago Tribune.
In November, J.B. Pritzker, who is in favor of legalizing recreational marijuana, was elected governor of Illinois. Canaccord analysts in November commented that Illinois “has the potential to be a meaningful rec market in the not-so-distant future.”
A study carried out by Colorado cannabis consulting firm Freedman & Koski, indicates that Illinois’ annual marijuana market could be between $1.69 billion and $2.58 billion. Overall, U.S. consumer spending on legal cannabis is expected to reach $22.2 billion by 2022, while Canadian spending is estimated to hit $5.9 billion, per a January report by Arcview Market Research and BDS Analytics (read: 4 Reasons Why Marijuana Stocks & ETFs Could Be on a High in 2019).
ETFs in Focus
ETFMG Alternative Harvest ETF MJ is the pureplay fund in the space. The fund is enjoying high momentum now. The underlying Prime Alternative Harvest Index enables investors to take advantage of both event-driven news and long-term trends in the cannabis industry as well as the industries likely to be influenced by the medicinal and recreational cannabis legalization initiatives taking place in many locations globally. The fund is up 45.6% in the year-to-date frame (as of Mar 11, 2019).
Apart from pure-play MJ, investors can tap this growth via AdvisorShares Vice ETF ACT. Cannabis-related products occupy 25% of ACT, while alcohol with cannabis exposure has 5% and tobacco with cannabis exposure has received 12% focus. The fund is up 18.1% this year.
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Aurora Cannabis (TSE:ACB)’s stock had its “outperform” rating restated by equities research analysts at Cowen in a research note issued to investors …
Aurora Cannabis (TSE:ACB)‘s stock had its “outperform” rating restated by equities research analysts at Cowen in a research note issued to investors on Tuesday, March 5th. They currently have a C$14.00 price objective on the stock. Cowen’s price target suggests a potential upside of 29.03% from the company’s previous close.
Other equities research analysts have also recently issued reports about the company. Jefferies Financial Group reissued a “buy” rating and set a C$12.00 price target on shares of Aurora Cannabis in a report on Monday, February 25th. Seaport Global Securities restated a “neutral” rating on shares of Aurora Cannabis in a research report on Thursday, February 21st. Finally, Eight Capital cut their price objective on Aurora Cannabis from C$17.00 to C$15.00 in a research report on Wednesday, January 9th. Two equities research analysts have rated the stock with a hold rating and three have issued a buy rating to the company. The stock has an average rating of “Buy” and an average price target of C$13.50.
Aurora Cannabis stock traded up C$0.23 during trading on Tuesday, reaching C$10.85. The company had a trading volume of 13,409,065 shares, compared to its average volume of 17,906,889. Aurora Cannabis has a 52 week low of C$5.29 and a 52 week high of C$16.24. The stock has a market cap of $10.99 billion and a P/E ratio of -109.60. The company has a debt-to-equity ratio of 8.08, a quick ratio of 1.89 and a current ratio of 3.31.
Aurora Cannabis (TSE:ACB) last announced its earnings results on Monday, February 11th. The company reported C($0.05) EPS for the quarter, topping the Zacks’ consensus estimate of C($0.06) by C$0.01. The company had revenue of C$54.18 million during the quarter, compared to the consensus estimate of C$52.13 million. Analysts predict that Aurora Cannabis will post 0.0300000005785921 EPS for the current year.
A hedge fund recently bought a new stake in Aurora Cannabis stock. Gulf International Bank UK Ltd purchased a new position in Aurora Cannabis Inc (TSE:ACB) in the 3rd quarter, according to the company in its most recent filing with the Securities and Exchange Commission (SEC). The firm purchased 11,669 shares of the company’s stock, valued at approximately $112,000.
About Aurora Cannabis
Aurora Cannabis Inc is a Canada-based company engaged in the production and distribution of medical cannabis. The Company is vertically integrated and horizontally diversified across every key segment of the value chain, from facility engineering and design to cannabis breeding and genetics research, cannabis, and hemp production, derivatives, home cultivation, wholesale and retail distribution.
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