Aurora Cannabis Should Get a Lift from High Tide

In this market news, Aurora Cannabis Inc. (TSX:ACB), one of Canadian marijuana stocks, said it will invest $10 million into High Tide Inc

SmallCapPower | December 21, 2018: Aurora Cannabis Inc. (TSX:ACB), one of Canadian cannabis stocks, announced recently that it has entered into an agreement to invest $10 million into High Tide Inc. by way of a private placement. Aurora will receive 10,000 senior unsecured convertible debentures issued by High Tide priced at $1,000 per debenture, bearing an interest rate of 8.5% per annum. The Debentures are convertible to common shares of High Tide at a post-split price of $0.75 per common share and will mature two years from the closing date of the Offering. The Debentures are subject to a statutory hold period that extends four months and one day from the closing date of the Offering.

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High Tide is an Alberta-based, vertically integrated, retail-focused cannabis and lifestyle Accessories company with a strong portfolio of companies such as RGR Canada Inc., Smoker’s Corner Ltd., Famous Brandz Inc., Canna Cabana Inc. and KushBar Inc.

Aurora Cannabis CEO Terry Booth stated, “In addition to four operational cannabis retail stores, High Tide has developed a broad network of smoking accessories and cannabis lifestyle stores that feature unique products, supported by strong branding that has resonated well with Canadian consumers. Through our investment, we gain exposure to two unique retail store concepts currently launching across Canada, as well as established cannabis culture brands and thousands of proprietary accessories. We look forward to working with the team at High Tide and supporting them as they execute on their aggressive growth strategy.”

High Tide is a vertically-integrated player, ripe to capitalize on the Canadian adult-use cannabis industry. With a strong retail network and manufacturing & distribution capacity, High Tide will be a strategic investment in Aurora’s company portfolio. Aurora Cannabis invested a total of $326.6 million in inorganic growth and the fair market value of these investments reached $698.6 million as of June 30, 2018. The inclusion of High Tide would provide Aurora with exposure to the retailing of cannabis accessories. High Tide, with its two wholesale businesses, Famous Brandz and RGR Canada, and the 19 existing Smoker’s Corner retail locations, serves more than 170,000 retail customers per year. Through Canna Cabana and eventually KushBar, High Tide currently operates four retail stores in Alberta, with additional leases secured with the intention of opening new locations across Canada in the near future.

Headquartered in Edmonton, Alberta, Aurora Cannabis is one of the leading cannabis companies with sales and operations across five continents, and a funded capacity of over 500,000 kg per annum. Aurora has achieved rapid growth by organic expansion and successful execution of strategic M&A, which includes companies such as MedReleaf, CanvasRX, Peloton Pharmaceutical, Aurora Deutschland (formerly Pedanios), H2 Biopharma, Urban Cultivator, BC Northern Lights, Larssen Greenhouses, etc. Aurora Cannabis stock trades at a market capitalization of C$6.8 billion with a price-to-book multiple of 1.62x.

Disclosure: Neither the author nor his family own shares in the company mentioned above.

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