It has been a long time coming, but the Aurora-MedReleaf acquisition is finally closed. Unfortunately for Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB), the company was unable to see much value added to its shares. In fact, Aurora Cannabis stock enjoyed a small jump last week when the Aurora-MedReleaf deal was finalized, but then quickly saw those gains disappear.
One would normally think that completing the largest acquisition in the history of marijuana and challenging Canopy Growth Corp (NYSE:CGC) for the title of largest marijuana producer in the world would lead to some gains on the stock market. But as we’ve seen with numerous other Aurora Cannabis stock acquisitions this year, the obvious route hasn’t always been the one traveled.
“The closing of this transaction brings together two vertically integrated, successful pioneers in the cannabis industry, creating a company with more than 1,200 employees and a rapidly growing domestic and international footprint,” Aurora’s chief executive Terry Booth said in a press release. (Source: “Aurora closes on MedReleaf in largest cannabis takeover yet,” Financial Post, July 25, 2018.)
The CA$2.5-billion deal is the largest in the industry by a good margin, but even when the deal was announced, it didn’t do much to spur sustained growth in Aurora Cannabis stock.
Chart courtesy of StockCharts.com
In fact, the company’s all-stock takeover is yet another addition to what has been a disappointing year for Aurora Cannabis stock—at least when looking at things from a short-term perspective.
It makes sense that investors are wary of a company on a spending spree in the marijuana industry. After all, with so many charges of overvaluation being thrown about, it only stands to reason that a company buying up companies that are accused of being overvalued would leave a sour taste in some investors’ and analysts’ mouths.
But while the short term has been unkind to Aurora Cannabis stock, these acquisitions are situating the company to be very strong moving forward.
Between the MedReleaf acquisition and its buyout of CanniMed Therapeutics Inc. earlier in the year, Aurora now has the capacity to be one of the biggest marijuana suppliers in the world.
As it seeks out new frontiers to expand its reach, this is going to be a huge boon to the company because it now has established producers pumping out marijuana at a speedy clip. This is also going to help position Aurora as a go-to company for Canadian retailers since it will be able to reliably fill orders due to its increased capacity.
And I doubt that this is the last we’ll hear of Aurora acquisitions. While it may take a break in 2018, the company has demonstrated that it wants to challenge Canopy for the top spot in the industry, and I doubt that it will back off anytime soon.
The Aurora-MedReleaf acquisition may not have yielded the exact results that Aurora Cannabis stock bulls would have liked, but the future is bright for the company.
While the short term is certain to be fraught with questions about its spending, the long-term projection for Aurora is solid as the company now has the means to be one of the true powerhouses in the industry.