As the selloff in the market deepens, many investors are wondering when things are going to get better, or when their portfolios are going to stop losing value.
Monday marked one of the biggest declines in history for all major indexes as the Dow Jones, Nasdaq and S&P 500 fell over 10% in one single trading session. Cannabis stocks were of course not immune to the selloff, and Aurora Cannabis (ACB) closed the day at 69 cents on the NYSE.
Now that ACB’s stock is under one dollar, their listing on the NYSE is in jeopardy, as it currently fails to meet the minimum requirement for the NYSE’s listing price of at least $1.
This morning ACB was hit with another bout of bad news as their former CEO dumped a huge position in the company. Terry Booth filed a report on the System for Electronic Disclosure by Insiders (SEDI) which stated that he sold 12,161,900 shares on the open market. The company stated that this transaction was in connection with the previously announced transition when Terry Booth stepped down as CEO.
ACB’s current interim CEO Micheal Singer had some words to say regarding this matter, “The Board and management remain focused on the plan we laid out in February and we are progressing as planned toward appropriate capital allocation, balance sheet strength, and profitability. We look forward to updating the markets on our next quarterly earnings call.”
If the market wasn’t spooked enough due to ACB’s high debt, profitability concerns and lack of transparency, this was seen as yet another blow to investor sentiment. When a former CEO dumps a massive position at all-time lows indicates to us that he has lost faith in the company.
Unfortunately, we saw a similar situation unfold recently when Tilray’s CEO Brendan Kennedy dumped a large portion of his shares before the stock plummeted into the single digits.
In our opinion ACB’s next quarter will be more crucial than ever, as the company fights for survival. During these times, the company needs to show its ability to raise revenues despite the COVID-19 threat to consumer spending.
One positive sign we have noticed recently has been that the Ontario Cannabis Store has reported record online sales due to many people staying at home recently. Will this be enough for Aurora Cannabis to record a decent uptick in sales this quarter?
Right now there are many uncertainties in the overall market, especially for the cannabis sector. We remain cautious when it comes to ACB at these levels, as low as they are.
(Disclosure: The author is long on Aurora Cannabis)
ACB shares were unchanged in after-hours trading Tuesday. Year-to-date, ACB has declined -67.13%, versus a -21.46% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaron Missere
Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles.
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