Aurora Cannabis Inc (TSE:ACB) Integration of Hempco Food and Fiber Inc (CVE:HEMP) Boosts Price

Benjamin A. Smith
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Aurora Cannabis Inc (TSE:ACB) (OTCQB:ACBFF) (FRA:21P) and Hempco Food and Fiber Inc (CVE:HEMP) (OTCMKTS:HMPPF) (FRA:22Y) once again demonstrates for cannabis investors that it pays to be associated with a sector leader.

Hempco Food and Fiber is soaring on the news that Aurora has exercised well in-the-money warrants on the provider of premier hemp based foods. The stake puts Aurora’s holdings at 21,117,352 Hempco common shares, reflecting an ownership interest of approximately 35%. Shares in Hempco are currently trading at session highs, up $0.38 to $1.46/share.

On Aurora’s part, the exercise of the warrants was a no-brainer. Aurora Cannabis had previously  purchased 10.6 million units for $3.25 million from Hempco on September 18, 2017. Each unit comprised of one common share and one common share purchase warrant. Each warrant was eligible to be converted to one Hempco share for a period of 24 months, at a price of $0.41. Furthermore, an accelerator clause was negotiated at the time of the transaction allowing Hempco to accelerate the warrant terms to 30 days should the share price exceed $0.65 for 30 consecutive calendar days.

With both of these conditions met—and with Hemco shares trading well north of $0.65/share since the deal was announced—the conversion was there for the taking. Aurora was already ahead more than $6 million in ‘paper’ equity pre-market, making the conversation a no-lose proposition. With today’s additional gains, Aurora’s return-on-investment soars to well over $10 million.

For Hempco Food and Fiber investors, the good news may be ongoing. Aurora Cannabis CEO Terry Booth gave additional signals that Aurora may increase its ownership stake beyond the warrant execution. From the press release, Mr. Booth is quoted as saying:

This additional investment in Hempco was anticipated from Day 1 of our strategic partnership… In addition to the warrants exercised, we intend exercising our option to buy founder shares, and take our position to north of 50%.

Of course, Terry Booth is referring to Aurora’s negotiated option to purchase an existing 10.8 million shares from the founders directly. So, if we include this future anticipated purchase—plus the original purchase shares and exercised warrants—Aurora Cannabis would command over fifty percent ownership of Hempco and a controlling interest in the company.

Although a relatively minor asset in Aurora’s extensive portfolio, it’s yet another example of the company’s savvy maneuvering in the cannabis space. The Midas Letter recently highlighted this point, noting that Aurora Cannabis’ investment in The Green Organic Dutchman (TGOD) was already worth $67 million. Previous strategic investments in Liquor Stores N.A. (TSE:LIQ) (OTCMKTS: LQSIF) and Radient Technologies Inc (CVE:RTI) (OTCMKTS:RDDTF) are pointing in the right direction.

With Aurora’s sphere of influence now extending to hemp fibers and foods, they now cover almost every conceivable niche in the cannabis space. That’s a place most cannabis companies can only dream to emulate.

Benjamin A. Smith

Benjamin A. Smith

Ben is a research analyst and capital markets professional with nearly 20 years of experience. His areas of expertise are broad-based, and include extensive knowledge of macro economics, stock/derivative trading, commodity complexes, cryptocurrencies and technical/quant analysis. He also maintains an particular affinity for U.S. politics and the macro-regulatory environment facing...
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