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Finally, Aurora Cannabis implemented the announced 12:1 reverse stock split, mainly aimed at preventing the cannabis company from being delisted from the New York Stock Exchange. ACB stock is in the red now.
It seems that in these days of panic surrounding the whole situation regarding the coronavirus outbreak, people are turning to a more natural solution. Aurora Cannabis Inc (NYSE: ACB) is Edmonton, Alberta-based marijuana company and, believe it or not, the most popular U.S.-traded stock on mobile trading app Robinhood, according to the website Robintrack.
Aurora Cannabis (ACB) stock went through something called a reverse stock split on Monday after shares plunged so much that the New York Stock Exchange might even drop the stock from its listings. In finance, a reverse stock split or reverse split is a process by which shares of corporate stock are effectively merged to form a smaller number of proportionally more valuable shares. A reverse stock split is also called a stock merge.
Aurora Cannabis After 2018 Marijuana Stock Boom
Aurora was pretty popular investment when the boom in Canadian marijuana stocks happened. The boom itself that corresponded with the 2018 recreational legalization of pot in Canada, assembling a huge pool of enthusiastic investors who are focused on owning some of the more than 1 billion shares outstanding.
Shares have been battered during the last year though, dipping from highs north of $9 in early 2019 to close at 69 cents on Thursday, as the company has reiterated its failures to bring promised profits and hit promised soaring goals. As the stock regularly went down, the company abandoned its management and went on altering its large share count by turning to the market for equity financing.
Aurora said that it would give its shareholders one share for every 12 currently outstanding, minimizing the number of shares from more than 1.3 billion to approximately 110 million, but also issue even more stock, diluting shares more than 30%.
It is still to be seen whether Aurora investors will have a massive payday, as shares appear to gain more than 1,000% before market data is corrected to take into account its newly compressed share count. At the time of writing, ACB stock was down 8.22% to $7.40.
Focusing on Rounding Up the Closest Whole Share
As Aurora packs 12 shares into one, it plans to focus to round up or down to the closest whole share rather than paying cash for shares that are leftover. This could be pretty critical to smaller individual investors who do not own a lot of shares. A company spokeswoman stated that shareholders with less than six shares won’t receive stock once the reverse-split completes.
Aurora is set to report its fiscal-third quarter earnings Thursday after the closing bell.
According to Innovation Shares managing director Matt Markiewicz, the reverse split was heavily waited by investors and Aurora couldn’t go differently even if it wanted. Innovation Shares’ holds Aurora stock through its Cannabis ETF.
“They had to do this to stay compliant with NYSE rules. They can’t jeopardize the U.S. because of the large shareholder base here. There’s no way the company would risk cutting that conduit.”
From the company, they’ve said they plan to sell even more shares in order to generate cash reserves after burning through a lot of its cash. Cash would be raised through a stock sale, selling as much as $350 million in shares into the open market in small batches.
Jefferies analyst Owen Bennett says that the new program shows a total mixture of around 30%, as of the stock’s closing price when the company announced the consolidation.
“Today’s announcement of a further at-the-market program, alongside language that suggests how this will be used, will be a blow to sentiment.”
He also added a target price of $1.45 and rated Aurora a hold.
Consolidating shares also means Aurora will have to update the worth its option grants to its workers, accustoming the value of the options and the price at which employees can sell the stock to show the new wrapped price. For many employees, that means the price at which they can sell the option will rise significantly above where Aurora shares will begin trading in May once the reverse-split is complete.