Aurora Cannabis Inc. (Nasdaq: ACB) (TSX: ACB) asked Canadian regulators on Friday to approve a plan to $650 million worth of stocks, debt, and other financial products over the next two years.
The move would help the Canadian cannabis giant secure financial stability in an environment where capital is scarce, though at the cost of diluting the stakes of its current shareholders.
Of the $650 million, $412 million will be slated for existing investors to purchase more shares while the remaining $238 million will be available to the company for financing future projects and acquisitions.
When a company issues more shares, ownership of the company is divided among more shareholders, which means that each individual share becomes worth less even though the overall value of the company remains the same.
Below the buck
There are more than a few cannabis companies fighting to stay above a buck lately. Village Farms International Inc. (Nasdaq: VFF) in January raised around $25 million dollars at the expense of its CEO’s stake becoming worth less than 10% of the company.
In the context of Aurora, the share price remains under $1, which could lead to its delisting from Nasdaq. Issuing more shares only sends the price lower.
Some companies diluting shares via securities or debt issuances remain safely above a dollar for now, such as Canopy Growth Corp. (TSX: WEED) (Nasdaq: CGC), which last month said it planned to sell $150 million worth of convertible debt in order to raise funds.
Others, such as C21 Investments Inc. (CSE: CXXI) (OTCQX: CXXIF), have cancelled issuance plans to appease shareholders.
Cannabis capital raises remain at multiyear lows nearly four months into 2023, with only $540.55 million raised through the first 10 weeks of the year versus $1.03 billion in the same period last year, according to Viridian Capital Advisors.
Debt represents 53.1% of total capital raised, while public companies have raised only 65.1% of total capital year-to-date, down from 79.1% last year.