Aurora Cannabis Inc (ACB Stock) suffers a bad financial trip, covid could come to the rescue

  • Aurora Cannabis Inc's share are on the back foot in both Canada and the US. 
  • The marijuana firm's financials are its may downers. 
  • The deepening coronavirus crisis could trigger higher pot consumption and bolster the ACB stock.

Aurora Cannabis Inc (NYSE: ACB in the New York Stock Exchange and TSE: ACB in the Toronto Stock Exchange) is falling once again. At the time of writing, the Canadian pot firm is down only around 1% to C$5.19 in its home market, while shares trading in the Big Apple is down 4.64% to US$3.80.

Is there room for arbitrage on Aurora's stocks? For such a move to work, equities of the Edmonton, Canada-based company would have to rise – and that is not the case. The recent hit to ACB's stock came from Cantor Fitzgerald, an investment bank, which fell out of love with Aurora and cut its rating from overweight to neutral. Moreover, it slashed the target from C$18 to C$7. As mentioned earlier, shares are trading in Toronto at a lower price.

Cantor Fitzgerlad's influential change of heart came after the cannabis company revealed a dismal financial picture. Aurora announced it will tap markets once again, looking to raise some $500 million after depleting a significant chunk of the money it raised beforehand. As of late October, it has only $272 million.

Moreover, the new attempt to raise money seems desperate. The weed company will try to fill the hole in its finances by selling not only warrants, debt securities, and subscription receipts, but also common and even preferred shares. That indicated Aurora is diluting its current shareholders, lowering the value of what they hold – and diminishing their influence.

Some fear that ACB could continue squeezing and eventually turn into Micro-Cap. That would represent a massive fall from grace for a firm once being at the forefront of the pot sector. Back in October 2018, Canada legalized marijuana and the American market was on the path of decriminalization and potentially even legalization.

Apart from the moderate pace that the world´s largest economy has gone in that direction, pot companies struggled with oversupply and competition. Moreover, their valuations began seeming like a pipe dream. Aurora Cannabis is down no less than 90% in the past 12 months. It is nearing a sub-$200 million which would count as a micro cap and put it off the radar of many investors. 

ACB Stock Forecast

However, as long as the company is alive, there are reasons to believe the stock could bottom out. First, Aurora expanded its offering by purchasing Reliva , a US-based company focusing on the cannabidiol (CBD) sector. There is substantial room for growth, as anyone walking on America's high streets knows – CBD seems to be everywhere. 

Another reason is the surge in US and Canadian coronavirus cases. The world is focused on the second wave of COVID-19 in Europe, and on the US elections. That crowds out concerns about rising infections in North America.

Even if Canadian province premiers and US state governors do not impose lockdowns, consumers may shy away from crowded places and stay more at home. The cold winter which is responsible for keeping people indoors and contributing to spreading the disease – may also boost the consumption of pot. 

Refraining from leaving the house means more free time to consume marijuana, and unfortunately, also raises the probability of feeling lonely and even depressed. The result could be a higher consumption of consicence alleviating substances, including products that Aurora Cannabis sells. 

Where is the bottom for ACB at which bargain-seekers come in? That is a hard question to answer, yet the knee-jerk reaction to the downside could be followed by an upside correction. 

More Aurora has three (mostly coronavirus-related) reasons rise

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex News

Latest Forex News

Editors’ Picks

GBP/USD hits new 2020 high near 1.35 on Brexit hopes

GBP/USD is rising toward 1.35, the highest since December 2020, shrugging off Brexit concerns. France may reportedly veto a deal if it sees too many compromises from the EU. The final US Services PMI met estimates.


EUR/USD holds onto 32-month highs after US data

EUR/USD is trading above 1.2150, the highest since April 2018. Optimism about a coronavirus vaccine and US fiscal stimulus boost markets and weigh on the safe-haven dollar. ISM Services PMI came out at 55.9, within estimates.


XAU/USD clings to gains near $1840 area, over one-week tops

Gold maintained its bid tone through the mid-European session and was last seen trading near the top end of its daily range, or over one-week highs around the $1840 region.

Gold news

Crypto market relentlessly fighting for new yearly highs

Bitcoin is leading the recovery in the cryptocurrency market after reclaiming the position above $19,000. Ethereum has managed to bring down the critical hurdle at $600 while Ripple is holding slightly above $0.62.

Read more

Extra week of Black Friday!

Learn to trade with the best! Don't miss the most experienced traders and speakers in FXStreet Premium webinars. Also if you are a Premium member you can get real-time FXS Signals and receive daily market analysis with the best forex insights!

More info