Inclusion of Aurora Cannabis Inc. (TSX:ACB) in the S&P/TSX Composite Index will drive liquidity of the stock and increase the number of institutions holding the cannabis company
SmallCapPower | March 13, 2018: Aurora Cannabis Inc. (TSX:ACB) Monday revealed that its stock will be included in the S&P/TSX Composite Index, the benchmark index for the Canadian equity market, effective March 19, 2018. It would be the third marijuana company to be included in the S&P/TSX Composite Index after the addition of Canopy Growth Corporation (TSX:WEED) in March 2017 and Aphria Inc. (TSX:APH) in December 2017. Aurora Cannabis’ inclusion in the index widens the Company’s investor appeal as index tracker funds would be required to purchase Aurora Cannabis shares.
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Aurora Cannabis CEO Terry Booth said, “Inclusion in the index just over two years after commencing commercial operations is a reflection of our exceptional pace of growth and shareholder value creation, and a testament to the Aurora Standard, which represents excellence in execution and customer care. This latest milestone will further expand our retail and institutional investor audience and further enhance Aurora’s liquidity, as we continue to execute diligently on our global expansion strategy.”
The addition of Aurora Cannabis in the S&P/TSX Composite Index will drive liquidity of the stock and increase the number of institutions holding the cannabis company, thereby increasing the likelihood of stock appreciation. Overall, this inclusion is a positive measure for the cannabis sector making it more appealing to the institutional investors and easing the accessibility to capital.
Launched in 1977, S&P/TSX Composite Index is a leading indicator for market activities in Canadian equity markets. Representing ~70% of the total market capitalization on TSX, the index includes 250 companies overall. Currently at the 15,600 level, financials, energy and materials sectors represent ~65% of the composite index followed by industrials, consumer, telecommunication, information technology, healthcare etc.
This development comes amidst Aurora Cannabis’ plans to get listed on a foreign exchange such as the Nasdaq, the New York Stock Exchange (NYSE) or the AIM, a division of the London Stock Exchange (LSE). At present, Aurora Cannabis is doing due diligence about the U.S. market before proceeding ahead as marijuana remains illegal at the federal level in the country.
Aurora Cannabis also announced the resignation of one of its director, Joseph del Moral, who is going to pursue a non-cannabis related opportunity. However, he will remain available to Aurora Cannabis as an advisor.
Aurora Cannabis currently trades at market capitalization of $5.71 billion on TSX with price-to-book multiple of 9.97x. After the announcement, Aurora Cannabis stock rose 2.82% on the TSX to close at $11.65 on Monday. Aurora Cannabis shares look all the more attractive to investors now on the back of healthy revenue growth, production capacity expansion measures, and strategic partnerships with other firms.
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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