Aurora Stock Tanks: Company Announces Reverse Stock Split (TSX:ACB) (NYSE:ACB)

There was a time when Aurora Cannabis’s (TSX:ACB) (NYSE:ACB) was among the most promising stocks in the cannabis sector, but over the past months, it has had a tough time. The stock declined to such a degree that the New York Stock Exchange threatened to delist. In order to avoid such an eventuality, the company announced on Monday that it is going to consolidate its shares.

Key Analysis

Aurora used to be one of the more popular cannabis stocks among American investors, and a large number of investors tried to acquire a chunk of its 1 billion outstanding shares. However, the fall has been swift for the Aurora stock.

Due to a range of issues pertaining to its business, the stock has gone from $9 a share at the beginning of 2019 to 76 cents a share as of Monday. The fall in the shares is a reflection of the fact that Aurora has failed to hit its targets and, in addition to that, continued to record losses.

According to the announcement from Aurora, shareholders are going to get one share for every 12 shares held by them, and that would reduce the number of shares in circulation dramatically. It will be reduced from 1.3 billion shares to around 110 million shares.

That being said, the reverse stock split from Aurora is not the only move from the company. It was also announced that the company would also be diluting share by as much as 30% as part of the process and that news was not received particularly well by the market.

The stock tanked by as much as 13% after it came to the fore. Oversupply of cannabis and slow rollout of retail outlets have been regarded as two of the main factors behind the company’s current situation. Additionally, Aurora failed to bring its expenses under control as well, and that eventually led to even more dilution of the stock as it scrambled to raise more cash.

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Been writing about and trading stocks since 2013. Manage a group of micro-cap investors on Facebook with over 15,000 members. Turned $8,500 into 185k the first year I started trading stocks and haven't looked back.