February 7, 2020 / 3:15 PM / 5 months ago

BUZZ-Street View: Capital crunch puts Aurora Cannabis in a tight spot; weed stocks fall

(Updates)

** Weed producer Aurora Cannabis on Thursday announced the exit of CEO Terry Booth, ~500 job cuts and C$1 billion ($752.79 million) in impairment charges

** Booth’s exit puts Aurora on same footing as rivals like Canopy Growth and Aphria, which have changed leadership as soaring costs and disappointing sales block road to profitability

** At least four brokerages cut PT on ACB after news, two of which also downgraded rating

** Aurora down 12.2% at C$2.37; other pot firms Canopy Growth, Tilray, Hexo, Cronos and Aphria down between 1.5% and 5.3%

CAPITAL CRUNCH AN “EXTREME UNCERTAINTY”

** Morningstar (Fair value: C$9.50) says risk of insufficient capital leads to extreme uncertainty for ACB, compared with rivals who have “deep-pocketed companies” backing them

** Canaccord Genuity (“hold”, PT: C$3) says it is concerned by Aurora’s expectations over next few quarters

** Cowen (“outperform”, PT: C$6) says industry-wide management changes are a telling sign that founder-led strategies are not going to cut it in a capital-constrained backdrop

** Jefferies supportive of job cuts, but says both Tilray and Aurora currently have no clear path to profitability and will have to raise capital again in the near future ** Eight Capital (PT:C$2, “buy”) says CEO retirement signals ongoing maturation of entire sector from its entrepreneurial roots to one that is prioritizing disciplined cash flow management and returns

** Compass Point (PT: C$2, “neutral”) says cost cut initiatives could help ACB achieve breakeven results by end of calendar 2020 or early calendar 2021 (Reporting by Arundhati Sarkar in Bengaluru)

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