Shares of Aurora Cannabis (NYSE:ACB) were soaring 11.2% higher as of 10:19 a.m. EDT on Wednesday. The Canadian marijuana producer announced that it had appointed Nelson Peltz as a strategic advisor. Peltz's role will be to help Aurora "explore potential partnerships that would be the optimal strategic fit for successful entry into each of Aurora's contemplated market segments" as well as advise the company on its global expansion strategy.
Nelson Peltz runs multibillion-dollar investment management firm Trian Fund Management. He has been an activist investor, serving on the boards of several major corporations. Peltz will receive options to buy nearly 20 million shares of Aurora Cannabis, making him one of the company's largest shareholders.
Normally, the addition of a strategic advisor wouldn't be a significant thing for investors to care about. In this case, though, Aurora's move could mean good things are on the way for the company.
The statement made by Nelson Peltz in Aurora's press release was especially intriguing. He stated that he looked forward to working with Aurora Cannabis "to evaluate its many operational and strategic opportunities, including potential engagement with mature players in consumer and other market segments" (emphasis added). That sounds like Peltz will be instrumental in helping Aurora make deals with companies outside of the cannabis industry.
A lack of such a deal has arguably been the biggest competitive disadvantage for Aurora Cannabis so far. Canopy Growth received a $4 billion investment from big alcoholic beverage maker Constellation Brands last year and promptly put the cash it received to work. Tobacco giant Altria invested $1.8 billion in Cronos Group for a 45% stake in the marijuana producer. Aurora, though, has had only rumors of potential deals.
Peltz could have the ability to make things happen for Aurora. He has strong connections in multiple industries, notably including consumer goods. Both Aurora Cannabis and Peltz appear to have confidence that the relationship will pay off.
The options that will be granted to Peltz over a four-year period could put millions of dollars in Peltz's pocket. This vesting schedule can also be accelerated if specific conditions are met, including "the consummation of certain defined transactions" and the closing price of Aurora's shares reaching at least CA$31.02, and then CA$41.36 for a specified number of trading days.
Investors should watch closely to see if Nelson Peltz can perform some deal-making magic on the behalf of Aurora Cannabis. If he does, the stock is likely poised to jump much more.
Even though Aurora has a higher production capacity than Canopy Growth, and the two companies are comparable in several other key areas, Canopy's market cap is much higher than Aurora's. This gap is due in large part to Canopy's relationship with Constellation Brands. Should Peltz help Aurora land a major partner, it could go a long way in helping the company catch up to Canopy Growth's valuation.