After imminent delisting by the New York Stock Exchange as its shares sagged to less than $1, Aurora Cannabis Company (XNYS: ACB) is bouncing back with a new strategy. On Monday, April 13, the Canadian weed company disclosed it’s set to consolidate its shares.
Until recently, Aurora has been trending in the investment circles following the boom in Canadian cannabis stocks. In 2018, the Canadian government legalized recreational marijuana, a step that drew many investors who yearned to own a part of the multi-billion industry. The company, based in Edmonton, Alberta, leads in popularity among the U.S.-traded stock on the mobile trading application Robinhood. According to information published on its website, Robintrack reveals that Aurora Cannabis has more than 900,000 users holding its stock.
Shrinking stock prices
In the past year, the Aurora cannabis company has recorded massively shrinking share prices. In early 2019, it’s shares were trading in the upwards of $9. On Monday, April 13, the company closed at 76 cents with 13.3% on Market Watch. With dwindling share prices, the company is actively considering various ways to bounce back.
According to Market Watch, Aurora is considering giving shareholders one share for every 12 shares outstanding. This strategy, often known as reverse split, would reduce the number of shares from over 1.3 billion to nearly 110 million. Importantly, according to analysts, it would produce even more stock and neutralize shares more than 30 percent.
By bundling 12 shares into one, Aurora seeks to round up or down to the nearest whole share so it doesn’t pay cash for the remaining shares. For small-scale investors who don’t hold many shares, this strategy can work in their favor. The company did not clarify whether investors with less than six shares would get one new share.
Aurora Cannabis now plans to consolidate its shares by May 11 after which the company’s stock will start trading at the new price. Innovation Shares, which is one of the Aurora shareholders, says investors largely expected the reverse split strategy and Aurora had no choice.
“They had to do this to stay compliant with NYSE rules. They can’t jeopardize the U.S. because of the large shareholder base here. There’s no way the company would risk cutting that conduit,” said Matt Markiewicz who is the managing director of Innovation Shares.
In addition to the reverse split strategy, Aurora cannabis company aims to sell more of its shares to create cash reserves after burning through much of its cash. The company plans to conduct a stock sale to raise cash by selling in small batches up to $350 million worth of shares into the open market. The marijuana company hopes this would help it revive its listing status.