Abysmal, atrocious, horrible, rotten -- pick your favorite description for how Aurora Cannabis (ACB -2.96%) stock has performed over the last few years. They're all applicable.
Aurora's share price currently stands more than 99% below its level from late 2018. The Canadian marijuana stock is down nearly 80% from where it was just one year ago. But there's now a more pressing dilemma than this catastrophic decline: Could Aurora Cannabis stock be delisted?
The simple answer
The simple answer to that question is yes. Aurora Cannabis has been delisted from stock exchanges before. However, the reasons why were positive. For example, the Canadian cannabis producer initially listed its shares on the Canadian Stock Exchange (CSE). It later moved to the Toronto Stock Exchange (TSE), resulting in a delisting from the CSE.
Similarly, Aurora originally listed its shares in the U.S. on the New York Stock Exchange (NYSE). In 2021, the company switched to the Nasdaq stock exchange to cut costs.
However, this time it's not as good of a story. Nasdaq requires that all stocks trade above $1 per share. If any stock is below $1 for 30 consecutive business days, the stock exchange will alert the company that it's out of compliance with listing requirements. The company then has 180 days to regain compliance or face delisting.
As of right now, Aurora isn't out of compliance. Its stock has closed below $1 for only nine consecutive business days. The problem, though, is that the trend doesn't look good. Aurora's shares have fallen 21% since Feb. 2, and no rebound appears to be in sight. A double-digit percentage gain is needed within the next three weeks to avoid a noncompliance notice from Nasdaq.
The better answer
The simple answer isn't always the best answer. That's true in this case. While Aurora Cannabis stock could be delisted from the Nasdaq stock exchange, it almost certainly won't actually be delisted.
Remember, Nasdaq gives companies 180 days to regain compliance. Even if Aurora's share price closes below $1 for 30 consecutive days, all it needs to do to remedy the situation is to close above $1 for 10 consecutive trading days.
It's quite possible this could happen naturally. For example, Aurora could report better-than-expected quarterly results that boost its share price. There could also be other developments that make investors jump aboard. One possibility is that Germany could establish a framework for the legalization of recreational marijuana that's beneficial to Aurora.
However, Aurora's fate doesn't rest on external factors alone. The company could take matters into its own hands via a reverse stock split.
Regular stock splits increase the number of shares outstanding to reduce the share price. Reverse stock splits do the opposite. They decrease the number of shares outstanding to increase the share price. Should Aurora be in danger of delisting by the Nasdaq at some point in the future, you can bet that it will conduct a reverse stock split if necessary.
Not as bleak a picture as you might think
Even the potential for being on the brink of delisting sounds ominous. However, the picture for Aurora Cannabis actually isn't as bleak as you might think.
Aurora delivered positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the first time ever in its latest quarter. CEO Miguel Martin said in the quarterly conference call that he couldn't guarantee the company would generate positive adjusted EBITDA every quarter. But he said that Aurora is "confident that we can deliver positive adjusted EBITDA on an annualized basis going forward."
That aforementioned possibility of Germany legalizing recreational pot isn't a long shot, either. Germany's health minister has indicated that the country could provide additional clarity about its legalization plans this spring. The recreational market could even open as early as 2025. As one of only three medical cannabis producers with domestic production licenses, Aurora could be in a great position to profit in an expanded market.
I won't pretend that everything looks great for Aurora Cannabis right now. That's certainly not the case. However, even with the stock potentially at risk of becoming noncompliant with Nasdaq's listing requirements, Aurora's outlook isn't as abysmal, atrocious, horrible, and rotten as it's been in the past.
