The cannabis sector has been volatile recently with Reddit-inspired trades booming and busting some marijuana stocks. Tuesday, shares of Aurora Cannabis (NYSE:ACB) jumped 12.8% as investors are back to trading based on industry news.
News from a large Canadian pension fund as well as a new acquisition in the sector have investors hoping there's more room for Aurora to run.
British Columbia Investment Management (BCI) significantly increased its stake in Aurora Cannabis as of the end of 2020, according to a Form 13F SEC filing. It ended last year with 290,404 shares, up from just 58,346 shares it reported three months prior. Also today, fellow Canadian pot grower HEXO (NYSE:HEXO) announced it plans to acquire Zenabis Global in an all-stock deal valued at approximately $235 million.
Consolidation in the marijuana sector has been ongoing, and investors in Aurora would likely view a combination with another pot company a positive for the struggling Canadian grower. Aurora initiated a business-transformation program early in 2020. The plan is designed to reduce expenses, better scrutinize capital expenditures, and improve its balance sheet to attain profitability. In its fiscal 2021 second-quarter results reported last week, the company said the plan "will give Aurora maximum flexibility and position the organization to drive significant cashflow in the coming quarters."
Increased ownership from the manager of British Columbia's public funds and further consolidation have investors feeling optimistic today. The hope is that Aurora can return to share-price appreciation, bringing the company's market capitalization closer to early 2019 levels when it was triple today's valuation.