U.S.-listed shares of Aurora Cannabis Inc. slid 14% Friday as investors digested a raft of bad news about the company, from the exit of its co-founder and chief executive to major job cuts, fresh impairment charges and guidance signaling more losses ahead.
The news prompted a round of price-target cuts as analysts reiterated sell ratings on the stock. That’s bad news for retail investors, whose enthusiasm for Aurora stock made it the most widely held stock on the trading platform Robinhood last summer, before a major selloff in the cannabis sector.
Stifel analysts led by Andrew Carter said the news suggested Aurora
is in a far more precarious position than previously understood: “We struggle to find value for current equity holders, and we are reducing our target price to C$1, continuing with our sell rating,” the analysts wrote in a Friday note to clients.
MKM analyst Bill Kirk is also sticking with his sell rating on the stock while leaving his price target at C$2 ($1.50), noting the news that Chief Executive Terry Booth was stepping down represented only the latest management change in the past 45 days. In December, the company announced the departure of Chief Commercial Officer Cam Battley, the man widely viewed as the face of the company and a potential successor to Booth.
Battley and Booth had offered some of the most upbeat, and ultimately inaccurate, projections among all cannabis companies, a group that, as a whole, has not been strong at accurate forecasting.
“We believe this optimism, particularly around growth and profitability created an organization with a bloated cost structure and a capital structure with burdensome convertibles and a heavily diluted equity base,” Kirk wrote Friday. “Unlike Canopy (CEO termination July 2019), who could draw on Constellation Brands Inc. talent for staffing needs, Aurora will have a hard time attracting the talent necessary to instill investor confidence.”
ousted CEO Bruce Linton, a co-founder, last July amid pressure from its biggest investor, Corona beer maker Constellation Brands
, which invested $4 billion in the company to make it the Canadian market leader.
Jefferies analysts Owen Bennett and Ryan Tomkins said Aurora may get some help from hedge-fund manager Nelson Peltz, who became a strategic adviser to the company last March. Peltz, the founder of Trian Fund Management, is a well-known activist investor who has run campaigns to shake up management and operations at a range of companies, including Procter & Gamble Co.
, the former DuPont
and Dow Chemical
, and General Electric Co.
. At the time of his hiring, the company said he would assist in sealing new cooperation agreements and with global expansion.
The latter goal appears to have been abandoned. The company announced plans to record asset-impairment charges of C$190 million to C$225 million and write-downs of C$740 million to C$775 million on Thursday, and said it would bring capital expenditures under C$100 million for fiscal 2020.
Aurora Chief Financial Officer Glen Ibbott said that the assets impaired are primarily in South America and Denmark, and the company’s “core Canadian cannabis assets are not impacted by these noncash asset-impairment charges.”
The company said it would focus on core areas including the Canadian consumer market, the Canadian medical-marijuana market, established international medical markets, and U.S. market initiatives. That statement and the write-downs suggest that Aurora will largely give up on international ambitions beyond the U.S. The company has established operations in Europe and South America.
“With goodwill previously [in excess of] 50% of total assets, this was a known risk,” said the Jefferies analysts. “No write-downs from Canada may be a surprise, but long-term growth expectations little changed by slower early growth.”
The company will likely try to recruit a new CEO with extensive experience in the consumer-packaging space, in line with two newly hired board members announced on Thursday, they wrote.
“Whether they can get this (and soon) remains to be seen however,” they wrote. Jefferies has a hold rating on the stock and C$2 share-price target.
Stifel said the company’s 2020 guidance suggests that cannabis revenue will lag its forecast by about C$20 million while it implies an adjusted EBITDA loss of C$67 million. Second-quarter guidance implies a decline in revenue from the first quarter, and the company is setting aside C$12 million in provisions to cover returns and price cuts.
“While market factors are well-known, this update suggests a weaker in-market performance, and we believe it will be difficult to improve from here while prioritizing investment,” the Stifel analysts wrote.
Like its rivals, Aurora has struggled to become profitable following a rocky rollout for legal cannabis in Canada, with red tape hampering the creation of a network of retail stores and allowing the black market to thrive.
With companies unable to get their product to customers, revenue numbers have disappointed investors and cash piles have dwindled, forcing companies into some desperate measures to raise capital. Many have resorted to the sale and lease-backs of real estate, or have canceled or revised the terms of previously agreed deals.
Codie Sanchez, a partner at Entourage Effect Capital, said the cannabis market is shifting from a license-aggregation phase to a product innovation phase to a market share-grabbing phase to — finally — a true execution phase.
“All of this will be good for the industry in the long term, but the price is this correction,” said the private-equity manager. “The silver lining — well-capitalized companies stand out because, as stocks fall, so do costs.”
Aurora stock has lost 78% of its value in the last 12 months. The ETFMG Alternative Harvest ETF has fallen 55% in the same time frame, while the S&P 500 has gained 23% and the Dow Jones Industrial Average has gained 16%.
Claudia Assis contributed to this report.
RBC warns house price correction could be deepest in decades | CTV News – CTV News Toronto
A housing correction, which has already led to four consecutive months of price declines in the previously overheated Greater Toronto Area market, could end up becoming “one of the deepest of the past half a century,” a new report from RBC warns.
New data released by the Toronto Regional Real Estate Board (TRREB) last week revealed that the average benchmark price for a home in the GTA fell six per cent month-over-month in July to $1,074,754.
Sales were also down a staggering 47 per cent from July, 2021.
In a report published on Aug. 4, RBC Senior Economist Robert Hogue said recent data from real estate boards underlines that higher interest rates are beginning to take a “huge toll” on the market.
Hogue said that with further hikes to come, prices will likely continue to slide in the coming months.
That prediction, it should be noted, goes against a report from Royal LePage last month which painted a rosier forecast for sellers in which values would more or less holding for the rest of the year following some declines in the second quarter.
“Our expectations for further hikes by the Bank of Canada—another 75 basis points to go in the overnight rate by the fall— will keep chilling the market in the months ahead,” Hogue said. “We expect the downturn to intensify and spread further as buyers take a wait-and-see approach while ascertaining the impact of higher lending rates. Canada’s least affordable markets Vancouver and Toronto, and their surrounding regions, are most at risk in light of their excessively stretched affordability and outsized price gains during the pandemic.”
The Bank of Canada has hiked the overnight lending rate by 225 basis points since March and has warned that further hikes will be necessary given that inflation remains at a near 40-year high.
In his report, Hogue pointed out that the housing correction “now runs far and wide across Canada” but he said that it is particularly pronounced in the costlier markets of Toronto and Vancouver.
In fact, Hogue said that housing resale activity in Toronto is at its slowest pace in 13 years, outside of the early days of the COVID-19 pandemic.
The stockpile of available homes is also up 58 per cent from a year ago, he noted.
“With more options to choose from and higher interest rates shrinking their purchasing budgets, buyers are able to extract meaningful price concessions from sellers,” he said, pointing out that the average price of a home in the GTA is down 13 per cent from March. “We expect buyers to remain on the defensive in the months ahead as they deal with rising interest rates and poor affordability.”
While Hogue did say that condos in the City of Toronto are likely to remain “relatively more resilient” he said that prices elsewhere will continue to fall for the time being, especially in the 905 belt “where property values soared during the pandemic.”
The July data from TRREB suggested that the average price of a home in the GTA was still up one per cent from July, 2021.
Commuters face GO transit cancellations, possible strike – CityNews
Canada Revenue Agency plans email blitz to get Canadians to cash outstanding cheques worth $1.4-billion – The Globe and Mail
The Canada Revenue Agency (CRA) is planning a massive e-mail notification campaign to reach Canadians across the country who have uncashed cheques worth a net $1.4-billion.
The e-mail notifications will target recipients of the Canada child benefit and related provincial and territorial programs, as well as recipients of the GST/HST credits and the Alberta Energy Tax Refund.
The CRA said it plans to send approximately 25,000 e-mails in August, another 25,000 in November and a further 25,000 e-mails by May, 2023.
However, even without receiving an e-mail notification, the agency said a taxpayer can check if they have a cheque by logging into My Account, a secure portal on its website to check if they have an uncashed cheque over a period of six months. It added that representatives can also view uncashed cheques of their clients.
Each year, the CRA said it issues millions of payments to Canadian taxpayers in the form of refund benefits. These payments are issued by either direct deposit or by cheque.
“Over time, payments can remain uncashed for various reasons, such as the taxpayer misplacing the cheque or even a change of address which did not allow for delivery,” the agency said in a statement.
The CRA said since the e-mail notification initiative was first launched in February, 2020, about two million uncashed cheques valued at $802-million were redeemed by May 31, 2022.
The average amount per uncashed cheque is $158 with some of them dating as far back as 1998, the agency said.
As of May, 2022, there were an estimated 8.9 million uncashed cheques with the CRA. In May, 2019, about five million Canadians had an estimated 7.6 million uncashed cheques.
“As government cheques never expire or stale date, the CRA cannot void the original cheque and re-issue a new one unless requested by the taxpayer,” the statement read. “These upcoming e-notifications are to encourage taxpayers to cash any cheques they have in their possession.”
The agency said taxpayers can register for the direct deposit option on its website to receive payments directly into their bank accounts.
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