ACB Stock Split – Is It Coming?
Stocks splits are always an interesting proposition. They cause a lot of hype and buzz, often increasing trading activity around a stock based solely on potential. Now, whether that trading is positive or negative varies. In the case of Aurora Cannabis Inc. (OTCMKTS:ACBFF), (TSE:ACB), an ACB stock split could very well prove to be a boon to the company’s value. But with the Canadian legalization date in 2018 for recreational marijuana right around the corner, I don’t think that what Aurora Cannabis stock needs right now is another shakeup.
The issue with an ACB stock split is that the company simply has too much going on to justify the move. With the Canadian marijuana legalization bill set to land as early as August (and almost certainly no later than fall), there’s already enough hype surrounding the major players in the Canadian marijuana market.
The company’s market cap of $3.83 billion puts it among the most dominant companies in the country, so it already has an established reputation and foundations. Not to mention that it had a very strong Q2 earnings report come out in February.
As my colleague noted in an earlier article, there’s a lot to be excited about for ACB stock.
The company set a new monthly record of sales in November, with about CA$3.1 million worth of cannabis shipped in the month.
Chart courtesy of StockCharts.com
It also is on track to becoming the largest producer of marijuana in Europe later this year. As I’ve said ad nauseam, companies that are orienting themselves to take advantage of laxer marijuana laws in Europe and the U.S. marijuana market have the best chance to remain on an upward trajectory well past Canadian marijuana legalization.
Which is a long way of saying that Aurora simply doesn’t need to bring in a stock split. The company’s value is already in penny stock territory, so price per share is hardly a dissuading factor for investors.
The company doesn’t need to split stocks. It’s an unnecessary risk, one that, while potentially helping the stock’s value, I don’t think merits braving the possibility that Aurora will be set back by an ACB stock split.
The Aurora-Cannimed Acquisition
Aurora Cannabis stock is also coming off the biggest deal in Canadian marijuana, having just inked a $1.1-billion acquisition of CanniMed Therapeutics Inc. (TSE:CMED), (OTCMKTS:CMMDF) after a month-long, bitter back-and-forth.
After months of attempted hostile takeovers and deal making, the Aurora CanniMed deal finally came to fruition.
The move has renewed my confidence in the Aurora stock forecast (not that it was ever wavering too much). But while industry analysts and investors take note when deals like these close, they are also wary when companies run into trouble like Aurora did in its bid for CanniMed.
But now that everything is settled, sorted, and solid between the two companies, there’s a good chance that Aurora stock will see a gain as a result of finalizing the deal.
The bottom line is that there’s too little upside to warrant an ACB stock split, considering the possibility of a backslide should the split rub the market the wrong way.
There’s so much going on at Aurora right now that attaching another storyline to the company name is likely to do more harm than good.
Investors want to see stability and growth from their companies. Aurora has the latter down pat, but the acrimonious fashion in which it acquired CanniMed has led to some investors doubting just how solid the company’s footing is. In my view, now is the time to hunker down at Aurora and complete smart, strong deals that are guaranteed stock boosters rather than take an unnecessary flyer on an ACB stock split.