Aurora Cannabis (ACB) is a pedigree name in the Cannabis sector, and like all Pot stocks, they are licking their wounds after being battered by short-sellers. It seems the only catalyst is a full federal mandate and the pandemic looks to delay the hope of a 2021 change in the law. This has allowed short sellers to press valuations to exaggerated lows, but after write-downs and consolidation the haters are now forced to cover – or pare positions – that have been profitable for more than a year.
Shares in Aurora (ACB) spiked as much as 30% on the news of a deal with Reliva, which sells hemp-derived CBD products. Reliva, will receive $40 million Aurora shares. The agreement also includes a potential earn-out of up to a maximum of $45 million payable in Aurora shares, cash or a combination over the next two years subject to Reliva achieving certain financial targets. The deal is expected to close in June.
Miguel Martin, CEO of Reliva commented, “We’re excited to join Aurora’s leading platform as we combine our highly complementary businesses and brands to build an even stronger company for future international success. We were fortunate enough to be able to choose our long-term partner and believe this partnership provides a significant opportunity to accelerate sales growth for Reliva in the United States and internationally. I am particularly pleased about the benefits that this combination will have for current and future trade partners. With the assistance of Aurora, we believe enhancements to Reliva’s innovation, consumer insights and marketing systems will allow our portfolio of hemp-derived CBD products to become even more attractive to retailers and consumers in this exciting new category.”
With Aurora’s stock down 44% since the start of the year, the news may offer some relief for investors. What’s more the company expects the deal to be “immediately accretive to Aurora on an adjusted EBITDA basis” and help drive its goal towards adjusted EBITDA profitability in its fiscal first quarter of 2021.
“Together, Aurora and Reliva will partner to create an international cannabinoid leader that we believe can deliver robust revenue and profitable growth,” said Michael Singer, Executive Chairman and Interim CEO of Aurora. “We have taken the time necessary to carefully assess the Company’s entry into the U.S. market and we firmly believe that the combination with Reliva will create significant long-term value as Reliva provides us options to grow in hemp-derived CBD internationally.”