Should Aurora Cannabis buy Alcanna?

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Followers of the cannabis stock space in Canada are likely familiar with the relationship between Alcanna (formerly Liquor Stores Of NA) and Aurora Cannabis. Alcanna (CLIQ) is a retailer of wine and spirits as well as cannabis in Canada. The company has a bit of a storied past with an attempt to grow in the US alcohol retail markets, having to re-evaluate this strategy, eliminating their dividend, and positioning itself to benefit on trends involving the legalization of cannabis through the Nova Cannabis brand. In order to capitalize on this trend, CLIQ received an equity investment from Aurora Cannabis back in February 5, 2018 of which the details follow:

  • Private placement with two phases
  • $103.5 million for 19.9% ownership (6.9 million shares) at a price of $15.00 (closed Feb. 14, 2018)
    • Done at a 24% premium to prices at the time
  • Subscription receipts at a price of $15.00 for 2.3 million shares totalling $34.5 million
  • Share purchase warrants at an exercise price of $15.75 which allow ACB to increase its ownership to 40%
  • Warrants that allow ACB to increase its ownership should some convertible debt be exercised (essentially allowing ACB to maintain its level of ownership).

Since this initial deal, the shares have not performed well with CLIQ trading at around $5 or a market cap of $192 million. The market-cap here is key...

Note, this is an addendum to our recent report update on Alcanna. You can read the report here. Not yet a member, get a free trial to read the report and this research here.