There was a time when Aurora Cannabis (NYSE:ACB) was regarded as one of the most promising companies in the industry, but over the past months, it has lurched from one trouble to the next. The stock price has tanked considerably as well. That being said, many of the pot stocks in the sector have recorded significant losses since April 2019, and Aurora is perhaps not an exception.
However, its balance sheet is in a singularly bad state. As a matter of fact, Aurora was one of the favorite cannabis stocks among millennial investors. However, the company’s performance has been a major disappointment.
The company has been losing money at an alarming rate, and in order to make up for the shortfall in cash, it has been issuing extra stock indiscriminately. Consequently, the stock has lost value quickly. To put it into perspective, Aurora now has 1.31 billion outstanding shares, up from 16 million back in June 2014.
Last week, the company initiated another offering of 500 million shares at the market rate to raise $350 million. More importantly, the Aurora stock is all set to go for a 1 for 12 reverse split on May 2, and that is expected to tank the share price further.
The company ended the second fiscal quarter with as much as $2.41 in its balance sheet, and it is believed that Aurora would need to go for additional write-downs. That could improve the balance sheet somewhat but could spell near term trouble for the stock. In addition to that impairment charge, the company could also be considering another impairment charge in relation to its equipment and property.
In the previous quarter, the company wrote down C$762 million in goodwill and C$52 million in value of its property. This is primarily due to the fact that Aurora will not get much value when it attempts to sell these properties. Investors could also need to brace for a write-down in the company’s inventory.