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Why Aurora Cannabis Stock Sank Monday

By Joe Tenebruso - Updated May 12, 2020 at 8:59AM

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The marijuana producer's investors now own far fewer shares -- and many aren’t too happy about it.

What happened

Shares of Aurora Cannabis (ACB -3.01%) fell 7% on Monday after the marijuana company conducted a reverse stock split.

So what

After brutal losses in recent months, Aurora's stock price fell below $1 per share. In order for its shares to continue trading on the New York Stock exchange, Aurora needed to take action to boost its stock price. That action came in the form of a reverse stock split, which resulted in shareholders receiving 1 share for every 12 they owned. 

The popular pot stock has fallen on hard times. Mounting operating losses and dwindling cash reserves have investors concerned that Aurora could run out of cash before it reaches sustained profitability.

A man with his head down on a table in front of a stock chart that rises and then plunges

It hasn't been easy being an Aurora Cannabis investor. Image source: Getty Images.

Now what 

Aurora is expected to raise additional capital to bolster its cash reserves. However, by selling more shares to the public, Aurora would dilute existing shareholders' ownership. 

After seeing the value of their shares plummet and the number of their shares reduced by more than 90% due to the reverse split, it appears that some investors have simply had enough.

Still, Aurora Cannabis will have an opportunity to give its remaining shareholders a reason to hang on when it reports its third-quarter earnings results after the market closes on May 14. 

 

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
$1.61 (-3.01%) $0.05

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