Aurora Cannabis, a Canadian cannabis producer, has announced that it will consolidate its common shares on a one-for-10 basis, subject to regulatory and stock exchange approvals. The company said that the share consolidation is intended to restore compliance with the Nasdaq’s minimum bid-price requirement, and to ensure continued access to a range of institutional investors.
The Nasdaq requires that listed companies maintain a minimum bid price of $1 per share. If a company’s share price falls below $1 for 30 consecutive trading days, it is considered deficient and faces the risk of delisting. Aurora’s share price has been trading below $1 since December 2023, and the company received a deficiency notice from the Nasdaq on Jan. 5, 2024.
The company said that the share consolidation will reduce the number of its outstanding common shares from 475,903,822 to 47,590,382. The company expects the share consolidation to be effective on or about Feb. 20, 2024.
The Impact of the Share Consolidation
The share consolidation will not affect the company’s market capitalization, nor the proportionate ownership and voting rights of its shareholders. However, the share consolidation will affect the company’s per-share metrics, such as earnings per share, book value per share, and cash flow per share. The company said that it will adjust its outstanding stock options, warrants, and other securities accordingly.
The share consolidation will also affect the company’s share price, which will increase by a factor of 10. However, this does not necessarily mean that the company’s value will increase, as the share consolidation is a cosmetic change that does not alter the company’s fundamentals or prospects. The company’s share price will still depend on the market forces of supply and demand, and the company’s performance and outlook.
The share consolidation may have some positive effects, such as improving the company’s image and credibility, attracting more investors, and reducing the volatility and liquidity of its shares. However, the share consolidation may also have some negative effects, such as diluting the shareholders’ equity, increasing the trading costs, and signaling the company’s financial distress.
The Outlook for the Company
The share consolidation is not the first time that Aurora has taken such a measure. In 2020, the company consolidated its shares on a one-for-12 basis, also to meet the Nasdaq’s requirements. However, the company’s share price continued to decline, as the company faced challenges such as declining revenues, mounting losses, asset impairments, and debt obligations.
The company said that it is still committed to achieving positive adjusted EBITDA and free cash flow in the calendar year 2024, and that it is taking the required steps to comply with the Nasdaq’s listing rules. The company also said that it is pursuing profitable international growth, and that it has a strong portfolio of brands and products.
However, the company also faces fierce competition, regulatory uncertainty, and market saturation in the cannabis industry, both in Canada and abroad. The company will need to prove that it can execute its strategy, improve its financial performance, and create value for its shareholders.
The share consolidation is a move that Aurora hopes will help it stay on the Nasdaq and access more capital. However, the share consolidation is not a solution to the company’s underlying problems, and the company will need to do more to regain the confidence and trust of the market.
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