Aurora Cannabis Shares Dive Following $250M Offering News

Aurora Cannabis Inc ACB stock plummeted more than 8.7 percent Thursday morning after the company announced plans for a $250 million debt offering.

What Happened?

After Wednesday's market close, Aurora announced a $250 million private placement of convertible senior notes due in 2024. The deal would also include the option for the buyers to purchase an additional $37.5 million in notes.

Why It’s Important

Aurora said the money raised from the offering will be used to grow its business, both in Canada and internationally. The company also plans to use the money for strategic acquisitions and working capital requirements.

While most smaller, high-growth companies with international expansion aspirations will need significant amounts of capital to expand, the $250 million offering of convertible debt means major dilution for current shareholders down the line. Aurora’s market cap prior to the announcement was only $7.31 billion.

Earlier this week, Aurora announced a $175 million buyout of Whistler Medical Marijuana Corporation. After completion of its second production facility in 2019, Whistler is expected to have a total capacity of 5,000 kilograms per year.

What’s Next

Aurora investors will be watching to see if the fundraising round results in management being more aggressive with the company’s growth efforts. Aurora issued fiscal second-quarter revenue guidance of between $50 million and $55 million earlier this month, well short of consensus analyst expectations of $67 million.

While investors may be disappointed with the dilution associated with the new debt offering, the company could win back some market confidence if the cash infusion helps get its revenue growth trends back on track.

Shares traded around $6.81 at time of publication.

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