Canadian cannabis giant Aurora in dire straits

It's a colossus with feet of clay. Aurora, one of cannabusiness in Canada, has just published catastrophic results. 55 million in sales for the second quarter of 2021. But, firstly, this result is 21 % lower than for the same period last year. Secondly, the Edmonton, Alberta-based company lost $24 million in three months.

There's something rotten in the kingdom of Aurora. And this has been the case for several months now. «Last spring, they came very close to bankruptcy., says Antoine Quesnel, a French investor specializing in the Canadian cannabis market. They had to do a dilution, i.e. divide their share price by 12. When a company does that, it's carnage. Since then, their stock market curve has been flat: nobody wants to invest in them anymore.»

Aurora's share price has collapsed. The blue «S» represents the moment of share dilution.

The only bright spot in Aurora's sky is its medical cannabis business. It's doing very well, with record sales for the month of March 2021. In the therapeutic field, the Edmonton-based company even leads the Canadian market. It's a different kettle of fish for the branch focused on recreational cannabis. Here, sales were down 37 % on the previous quarter.

Sell the recreational cannabis branch, keep the medical?

More and more specialists are advising Aurora to keep just one branch. « Given the poor results in recreational sales in recent times, the company could become stronger with a growing medical market, where Aurora maintains its leading position.», supports Pablo Zuanic, analyst with Cantor Fitzgerald investment bank.

«It could be a good idea, but I don't see who would be interested in the branch. recreational, adds Antoine Quesnel. I can see someone buying the medical division, which brings in $120 million a year. It could be sold for several hundred million dollars.»

For this investor, Aurora needs to move upmarket to save its skin. «Their competitors make better cannabis, so you don't have to look for noon at 2 p.m.! I see plenty of comments on specialized Canadian forums, where the opinions are negative. And the photos aren't very appealing.»

Especially since the Canadian market favors small, local producers, to the detriment of giants like Aurora, Tilray or CanopyGrowth. «It's like beer: many people prefer a good IPA to a Heineken».», laughs Antoine Quesnel.

The proof is in the small Quebec producer Lot 420, originally from the Eastern Townships, creates a sensation with its top-of-the-range cannabis. He recently sold an exceptional Gelato #33.