The time was right for Aurora Cannabis Inc. to strike with yet another bought deal last week. The cannabis company looked to take advantage of a recent run in its stock amid a broad investor move into cannabis at the beginning of the year.
The net result is an additional US$137 million in proceeds to Aurora’s balance sheet, albeit with some additional dilution to the company’s stock. While some shareholders may be growing tired of Aurora’s equity moves, the additional capital will give the company some more flexibility when looking south of the border for additional deals, its chief executive officer told BNN Bloomberg. One analyst estimated the move now gives Aurora roughly $700 million in capital to use for further investment.
“The reality is, right now our current syndicate of financing has a risk tolerance as it pertains to us, that is probably a lot more conservative than maybe ours would be,” said Miguel Martin in a recent interview.
“We needed to put ourselves in a position where if something were to happen, particularly in the U.S., we could take them out and have maximum flexibility.”
What Aurora’s role in the U.S. cannabis market will be remains to be seen. The company does have some operations there through its acquisition of CBD retailer Reliva LLC, but Martin sees the company’s expertise in plant genetics and cultivation as a potential asset to deploy once it can operate in the U.S.
Martin points to Canopy Growth Corp.’s recent lawsuit against GW Pharmaceuticals PLC in the U.S. over CBD extraction methods as a pivotal moment that could help determine the value of what some cannabis genetics and intellectual property is worth.
“Companies like Aurora, or Canopy, have some of the deepest genetic libraries in the world,” he said. “Someone’s gonna look like [agricultural seed supplier] Monsanto. I’m not saying it’s us, but someone’s gonna look like Monsanto.”
But Martin adds that he thinks once the U.S. does legalize cannabis federally – something that might take longer than what some people have eagerly forecast – it’ll look a lot more regulated with the U.S. Food and Drug Administration borrowing the same playbook employed by Health Canada.
“I just think that people are a little bit naive if they don’t think it’s going to look a lot like Canada and a lot less like the Wild West when it comes to federal regulation of cannabis,” Martin said.