Few other industries, if any, are growing as quickly as the legal marijuana industry in North America. Cannabis research firm ArcView pegged the growth of North American legal weed sales at 33% in 2017, to $9.7 billion, and believes that growth could average 28% per year through 2021. Growth of this magnitude is tough to ignore, a big reason marijuana stocks have been virtually unstoppable for years.
Though sales growth is coming from Mexico, the U.S., and Canada, it's the expected legalization of recreational marijuana in Canada that specifically has investors giddy with excitement. Legalizing the sale of cannabis to adults will open the door to $5 billion in annual sales, if not more. These lofty estimates have been behind the breakneck capacity expansion we've witnessed from growers in Canada.
Aurora Cannabis lays the foundation for top-tier pot production
Perhaps no other publicly traded pot stock has gone more gangbusters in terms of capacity expansion than British Columbia-based Aurora Cannabis (NASDAQOTH:ACBFF). When the calendar hit Jan. 1, 2018, Aurora was essentially working with one mammoth project: its organic build-out of the 800,000-square-foot Aurora Sky project. When complete, it is supposed to yield in excess of 100,000 kilograms per year for Aurora. However, management has been one busy bee ever since. In no particular order, Aurora:
- Partnered with Alfred Pedersen & Son in Denmark to retrofit an existing 1-million-square-foot greenhouse facility to grow cannabis. Known as Nordic Aurora, it'll be leaned on for 120,000 kilograms of annual production.
- Announced its intent to build a 1.2-million-square-foot facility in Medicine Hat, Alberta, to be known as Aurora Sun. This facility is expected to produce 150,000 kilograms per year.
- Acquired Saskatchewan-based CanniMed Therapeutics in what was, at the time, the priciest pot buyout in history.
- Announced an all-share tender for Ontario-based MedReleaf (NASDAQOTH:MEDFF) for $2.5 billion in what will now become the largest marijuana deal to date. MedReleaf has 140,000 kilograms in peak annual production under construction.
Altogether, including its smaller projects, Aurora Cannabis could be generating 570,000 kilograms of cannabis per year, once at full capacity. This might very well make it the largest pot stock (by production) in all of Canada.
Three things you may not know about Canada's cannabis kingpin
While you might think you know everything about this marijuana kingpin in the making, there are probably a few facts about Aurora Cannabis that have slipped under the rug. Here are three of them.
1. Aurora has an ancillary business that doesn't involve touching the cannabis plant
Though most on Wall Street probably know Aurora Cannabis as the grower that could produce the most weed when at full capacity, they may not realize that Aurora is also involved in the highly lucrative ancillary pot business. In other words, it has operations that don't come into direct contact with the cannabis plant.
In November 2017, Aurora announced the acquisition of Larssen, a company involved in the design, engineering, and construction of greenhouses throughout the world. Larssen had been commissioned to manage the Aurora Sky project prior to this acquisition, and was regularly relied on by Aurora to handle greenhouse builds and retrofits. By acquiring Larssen, Aurora internalized its design and development costs for its numerous greenhouse projects, and gave itself a way to generate ancillary revenue by providing consulting and construction services to other growers. Currently, Larssen is working on greenhouse projects for The Green Organic Dutchman and Australia's Cann Group.
2. Aurora's focus is on medical marijuana, even with recreational weed about to be legalized
Another tidbit you may not know about Aurora Cannabis is that unlike many of its peers, which are focused almost entirely on the domestic recreational weed market, it's predominantly geared toward medical marijuana production.
Given that adult-use marijuana represents a much larger consumer pool, this probably doesn't make much sense. However, there are advantages to focusing on the medical side of the equation. For starters, aggregate demand is technically expected to be stronger for medical marijuana, once exports are added into the equation. There are more than two dozen countries worldwide where medical cannabis is legal, and Aurora is angling to be a primary supplier to these regions. In fact, Aurora Nordic's proximity to Europe's numerous medical-legal countries is no accident. It's part of Aurora Cannabis' plan to serve the European market as a key supplier.
What's more, medical marijuana is likely to be less of a commoditized indication, relative to the dried cannabis often purchased by recreational users. By focusing on cannabis oils and extracts, Aurora should be able to lessen the pain felt by dried cannabis commoditization, as well as appease those foreign countries where medical cannabis is legal, but the consumption of cannabis via smoking isn't allowed.
3. Aurora has plans to uplist to the Nasdaq Composite
Finally, investors should consider it just a matter of time before Aurora Cannabis makes a move to uplist from the over-the-counter (OTC) exchange to the Nasdaq.
Shortly after Cronos Group became the first pot stock to uplist from the OTC exchange, a Twitter user asked Aurora's chief corporate officer, Cam Battley, whether or not a similar move would be coming from Aurora. Here's Battley's response:
Well, in Canada we uplisted from CSE to TSXV to TSX. And in the US from OTCQB to OTCQX. So what would be your guess? ;)— Cam Battley (@CamBattley) March 3, 2018
Since this tweet, Canopy Growth Corp., which is the largest marijuana stock by market cap, became the first pot stock to uplist to the New York Stock Exchange. Given how recently Canopy uplisted, there's probably pressure coming from Aurora's shareholders to make a similar move and improve both the liquidity and validity of Aurora Cannabis' listing.
If I had to guess, I'd presume an uplisting will come following the expected completion of the MedReleaf buyout.