Aurora Cannabis Inc Spin-Out Date Announcement Powers Stock In Early Trade

Benjamin A. Smith
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Have the tables ever turned on Aurora Cannabis Inc (TSX:ACB) (OTCQB:ACBFF) (FRA:21P) stock over the past few sessions. After falling over fifty percent, peak-to-tough, over a seven week period ending last Tuesday, the stock has been rebounded considerably since. Given the news that came out this morning, there’s a good chance the out-performance will stick around for the balance of the week.

Before the opening bell, Aurora Cannabis announced a firm Distribution date for the spin-out of it’s American subsidiary, Australis Capital Inc. That date of record is set for Friday August 24, 2018. At the close of the aforementioned date, Aurora Cannabis shareholders will be eligible to receive the Distribution of Australis units, which comprise of one common share and one share purchase warrant. Each warrant will entitle the holder to acquire one share at an exercise price of $0.25 per Australis share, one year from the distribution date. the Distribution will be paid on the basis of one unit for every 34 Aurora shares outstanding on the record date.

Aurora anticipates the completion of the Distribution to shareholders and the public listing of Australis on the Canadian Securities Exchange (CSE) to be completed in September 2018. 

Obviously, the “free” dissemination of spin-out shareholder capital is something investors are going to want to own. With federal legalization ambitions gaining steam in the United States, who knows how valuable  Australis warrants could be by the time the vesting period ends next September. In the meantime, the issued shares will hold long term appeal, and presumably, provide an arms-length link to Aurora Cannabis if/when it decides to enter the U.S. market in a defining way.

Regardless, long term Aurora Cannabis shareholders will essentially receive a free gift for owning as asset they were committed to anyway, while shorter term spec traders profiteer off the latent demand and short-covering gripping the stock.

As of August 15th, ACB notional short positioning stood at $413,368,158 which is a ↓-22.76 % net decrease from the prior two weeks. While it’s impossible to know the exact average price of the aggregate short postioning, needless to say it’s a material percentage of the public float. With today’s Distribution date cemented, the sizable short interest is acting as a tailwind for short term price appreciation.

Aurora Cannabis is currently among the strongest cannabis stock in the sector in early trade. ACN is higher by $0.59 to $7.09/share (↑9.08%). The stock is now trading above the MedReleaf transaction closing, which took place on July 25th.

Company Last Change % Change Volume Market Cap
Cronos Group Inc. 7.19 0.65 9.94% 4,090,835 1,271,951,523
Aurora Cannabis Inc. 7.06 0.56 8.62% 10,902,476 6,702,526,706
Emerald Health Therapeutics Inc. 3.07 0.19 6.60% 462,196 415,946,643
Canopy Growth Corporation 35.86 2.11 6.25% 7,587,326 7,909,803,751
CannTrust Holdings Inc. 8.24 0.36 4.57% 360,973 856,491,886
Auxly Cannabis Group Inc. 0.8 0.03 3.90% 551,216 455,272,246
Aphria Inc. 10.99 0.41 3.88% 2,443,214 2,554,461,617
OrganiGram Holdings Inc 5.22 0.17 3.37% 424,049 651,313,896
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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