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Why Aurora Cannabis Stock Plunged 18% in April

By Joe Tenebruso – May 3, 2020 at 4:00PM

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The beleaguered marijuana stock is burning through cash at an alarming rate.

What happened

Shares of Aurora Cannabis (ACB -12.78%) lost nearly 20% of their value in April, even as the S&P 500 gained more than 12%. A host of maladies have combined to crush the popular marijuana stock.

So what 

Ontario, Canada's most populous province, forced marijuana dispensaries to close on April 4 as part of its efforts to stem the spread of COVID-19, the disease caused by the novel coronavirus. Although the pot shops were allowed to reopen a few days later, only phone and online orders were permitted. The situation worsened what had already been a shortage of cannabis retail outlets in Canada, which has resulted in supply overages for major marijuana producers like Aurora.

The lack of retail outlets is particularly damaging to Aurora, which has seen its cash reserves dwindle following hefty operating losses. Investors are rightfully concerned that the cannabis giant could run out of cash.

A pile of cash burning in flames

Aurora Cannabis is rapidly burning through cash. Image source: Getty Images.

Now what

With its shares down another 5% already in May, Aurora's stock price is now down a brutal 67% so far in 2020 -- and more than 90% over the past year. Yet more pain might lie ahead.

Aurora has been forced to cut costs by ceasing the construction of some of its most promising production facilities, selling off other cannabis production assets, and laying off hundreds of workers. Yet despite these actions, Aurora's path to profitability remains uncertain.

The beleaguered cannabis company is once again turning to share issuances to raise cash, which will probably further dilute shareholders. Worse still, insiders appear to be bailing out of the stock.

For all of these reasons -- and with more losses likely on the horizon -- Aurora Cannabis' investors might want to consider selling their shares.

 

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Aurora Cannabis Stock Quote
Aurora Cannabis
ACB
$1.16 (-12.78%) $0.17

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