If you want to see an explosive force coming together in the cannabis patch, imagine seeing a company with well over $200M in cash get access to another $200M in bank credit. Now imagine that this company has a pattern of strategic activity that rates it as clearly the most aggressive shark in the water. And then put all of this right in front of the full recreational legalization for pot in Canada. That’s exactly what we have here today in Aurora Cannabis Inc (OTCMKTS:ACBFF).
Specifically, the company just announced that it has agreed to a new $200 million debt facility, with a potential to upsize to $250 million, with the Bank of Montreal. According to the release, “The facility will consist of a $150 million term loan and a $50 million revolving credit facility, both of which will mature in 2021. A short period after the implementation of Bill C-45 in October 2018, the Company may request an increase of up to a further $45 million to the term loan subject to agreement by BMO and satisfaction of certain legal and business conditions.”
Aurora Cannabis Inc (OTCMKTS:ACBFF) is a licensed producer of medical marijuana pursuant to the Marijuana for Medical Purposes Regulations and operates a 55,200 square foot expandable state-of-the-art production facility in Alberta, Canada.
ACBFF’s wholly-owned subsidiary, Australis Capital Inc., seeks to be an active participant in the U.S. Cannabis market. Aurora is trading on the Canadian Securities Exchange under the trading symbol “ACB”. The company is headquartered in Vancouver, Canada.
According to company’s materials, “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. The Company operates a 55,200 square foot, state-of-the-art facility in Mountain View County, Alberta, is currently constructing a second 800,000 square foot production facility, known as “Aurora Sky”, at the Edmonton International Airport, and has acquired, and is undertaking completion of a third a 40,000 square foot production facility in Pointe-Claire, Quebec, on Montreal’s West Island. In addition, the Company holds approximately 9.6% of the issued shares (12.9% on a fully-diluted basis) in leading extraction technology company Radient Technologies Inc., based in Edmonton, and is in the process of completing an investment in Edmonton-based Hempco Food and Fiber for an ownership stake of up to 50.1%. Furthermore, Aurora is the cornerstone investor with a 19.9% stake in Cann Group Limited, the first Australian company licensed to conduct research on and cultivate medical cannabis. Aurora also owns Pedanios, a leading wholesale importer, exporter, and distributor of medical cannabis in the European Union, based in Germany.”
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As noted above, unquestionably the most aggressive strategic actor in the cannabis space just doubled its strategic buying power ahead of a major expansion in the cannabis market. This suggests a likely set of moves to further consolidate capacity and supply chain range under one management team to amp up efficiency through greater coordination.
“Having successfully met all of BMO’s stringent risk assessment and other due diligence criteria to establish this facility reflects well on the maturity, progress and prospects of Aurora, as well as the quality and economic value of our production facilities,” said Terry Booth, CEO. “This is by far the largest traditional debt facility in the cannabis industry to date. The funds provide us additional fuel to complement our end-to-end portfolio of vertically integrated, geographically and horizontally diversified assets, aimed at building a pre-eminent global cannabis company with a superior margin profile.”
At this time, carrying a capital value in the market of $3.97B, ACBFF has a significant war chest ($231M) of cash on the books, which stands against about $2.6M in total current liabilities. One should also note that debt has been growing over recent quarters. ACBFF is pulling in trailing 12-month revenues of $42M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 211.1%. As more color becomes clear on the name, we will review the situation and update our take. Sign-up for continuing coverage on shares of $ACBFF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!
Disclosure: we hold no position in $ACBFF, either long or short, and we have not been compensated for this article.