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Aurora Cannabis Inc (OTCMKTS:ACBFF) Boosting Its War Chest

Aurora Cannabis Inc (OTCMKTS:ACBFF) Boosting Its War Chest
Written by
Alex Carlson
Published on
January 30, 2017
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Aurora Cannabis Inc (OTCMKTS:ACBFF) is on Insider Financial's list of must-own pot stocks. After Canopy Growth Corp became Canada's first billion dollar cannabis unicorn, we said that Aurora Cannabis would be next. However, we also said last month that Aurora Cannabis was in a consolidation phase before resuming its march higher. Shares have bounced off the C$2 and USD$1.50 support levels, and look primed for the next move higher after Aurora Cannabis boosts its war chest with C$60 million. This new financing looks to further cement the bid in Aurora's share price. Digging deeper, there's a lot to like at Aurora Cannabis.First up, a little background on the company. Aurora's wholly-owned subsidiary, Aurora Cannabis Enterprises Inc., is a licensed producer of medical cannabis pursuant to Health Canada's Access to Cannabis for Medical Purposes Regulations (ACMPR) and operates a 55,200 square foot, expandable, state-of-the-art production facility in Mountain View County, Alberta. Aurora trades on the TSX Venture Exchange under the symbol ACB, OTC Markets under the symbol ACBFF, and in Germany under the symbol 21P.The C$60 million financing is actual an expansion of a previously announced private placement offering. Strong demand from global institutional investors led Canaccord Genuity Corp to increase the size of the offering. Under the new terms, the Underwriters have agreed to purchase, on a bought deal private placement basis, 26,670,000 units of the Company at a price of $2.25 per Unit for aggregate gross proceeds to Aurora of $60,007,500. The Underwriters also were granted the option to purchase up to 6,667,500 additional Units at the Offering Price. If the underwriters' Option is exercised in full the aggregate gross proceeds of the Offering will be $75,009,375, which we expect to be exercised. Closing of the Offering is expected to occur on or about February 23.Net proceeds from the Offering will be used primarily towards the Company's strategic growth initiatives including its 800,000 square foot Aurora Sky cannabis production facility currently under construction at the Edmonton International Airport. Aurora said that the location of Aurora Sky provides a number of major competitive advantages, including access to abundant and reliable low-cost power, as well as unparalleled proximity to infrastructure and essential services, such as gas, water, sewage, public transportation, courier services, and international customs for clearing supplies and equipment.Furthermore, the location facilitates capitalizing on opportunities for future export of product and genetics around the world. The new 800,000 square foot Aurora Sky facility will have Aurora Cannabis on track to producing 100,000 kilograms of dried product annually. With the facilities of the Edmonton International Airport at its disposal, Aurora Cannabis is poised to be an international cannabis player.The new Aurora Sky facility also positions Aurora to capitalize on the legal recreational cannabis market. We expect recreational use to be legalized sometime this spring. In December, we saw the Canadian Federal Task Force issues its recommendations on how to legalize recreational marijuana use. The proposals include a minimum purchase age of 18, federal oversight on production, provincial governments charged with retail distribution and maintaining criminal offenses for illicit production and trafficking. The Task Force was lead by Canada’s former attorney general and offered more than 80 recommendations on how Canada could become the largest developed-world country to legalize marijuana.The next catalyst on the horizon for Aurora Cannabis will be Q2 results. In Q1, Aurora posted sales of 435,720 grams of cannabis for revenues of C$3.1 million. Compared to Q4 2016, cannabis sales volume (in grams) was up 117.5% and up 151.7% in terms of dollar revenue, reflecting an increase in the average price per gram of product sold. Aurora is now generating over C$1 million per month with product sales in excess of 200 kilograms each month.Currently trading with a market cap of C$635 million, Aurora Cannabis is one of the best run cannabis companies in the world. We believe the favorable regulatory environment in Canada and the support from institutional investors mitigates any downside risks for investors. The warrants in the new private placement are priced at C$3, so institutions need a higher share price to book the profits they're expecting. The smart money is getting behind Aurora Cannabis Inc and that signals much higher prices ahead. We will be updating our subscribers as soon as we know more. For the latest on ACBFF, sign up below!Disclosure: We have no position in ACBFF and have not been compensated for this article.

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