What happened
Shares of Aurora Cannabis (ACB 3.55%) crumbled by more than 11.7% on Monday as of noon ET amid a widespread decline in markets stemming from inflation concerns and the associated actions to control it as implemented by the Federal Reserve. With the Nasdaq falling by more than 3.7%, today's decline is only the latest rough day for the stock among many.
Growth stocks are being hit particularly hard by the downturn, and to add insult to injury, cannabis stocks haven't been performing well in at least a year, with the industry-tracking AdvisorShares Pure US Cannabis ETF falling by more than 66.6% in the last 12 months.
NASDAQ: ACB
Key Data Points
So what
Aurora has issues that this decline will make worse, starting with being unprofitable and needing more cash. On June 1, it concluded a bought deal offering of 70.4 million of its units, each of which was priced at $2.45 and contains one share and one warrant. In total, the offering was worth around $172.5 million.
The warrants are convertible into shares for the next three years once the stock is above the exercise price of $3.20. Given that the company's shares are trading near $1.20, it's looking unlikely that the warrants will be worth anything before they expire.
Now what
Investors can expect Aurora to face an even more unfavorable financing environment where issuing new shares will be less and less lucrative.
That matters because it may start to run short on cash in around a year if its expenses don't fall significantly. It could still try to take out new debt, but it'll likely have to do so at an expensive interest rate as a result of its shrinking revenue and already-bulging balance sheet.
