Aurora Cannabis Inc. said Monday it has set the early conversion price for C$230 million ($173 million) of 5% convertible bonds due in March at C$3.28, a discount to the stock's Friday close of C$3.50. The Canadian cannabis company said 99% of the holders of the notes have opted for early conversion. Aurora surprised investors when it announced its plan to offer holders of the notes the option to voluntarily convert them into stock at a conversion ratio that would be highly dilutive to its existing shareholders. Craig Behnke, equity analyst at Marijuana Business Daily's Investor Intelligence unit, said last week the move was "stunning" and a "terrible precedent to set." Investors can expect more of the same, according to Mike Regan, also an equity analyst at MJBiz's Investor Intelligence. "As cannabis company fundamentals weaken and capital gets tighter, common equity investors need to recognize the possibility of major dilution from the equitization of debt that is due soon," he wrote in recent comment. "This raises the cost of equity for any companies with debt." Aurora's U.S.-listed shares were flat in premarket trade, but have fallen 46% in 2019, while the ETFMG Alternative Harvest ETF has fallen 30% and the S&P 500 has gained 24%. Read More...
Aurora Cannabis Inc. said Monday it has set the early conversion price for C$230 million ($173 million) of 5% convertible bonds due in March at C$3.28, a discount to the stock’s Friday close of C$3.50. The Canadian cannabis company said 99% of the holders of the notes have opted for early conversion. Aurora surprised investors when it announced its plan to offer holders of the notes the option to voluntarily convert them into stock at a conversion ratio that would be highly dilutive to its existing shareholders. Craig Behnke, equity analyst at Marijuana Business Daily’s Investor Intelligence unit, said last week the move was “stunning” and a “terrible precedent to set.” Investors can expect more of the same, according to Mike Regan, also an equity analyst at MJBiz’s Investor Intelligence. “As cannabis company fundamentals weaken and capital gets tighter, common equity investors need to recognize the possibility of major dilution from the equitization of debt that is due soon,” he wrote in recent comment. “This raises the cost of equity for any companies with debt.” Aurora’s U.S.-listed shares were flat in premarket trade, but have fallen 46% in 2019, while the ETFMG Alternative Harvest ETF has fallen 30% and the S&P 500 has gained 24%.
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