Aurora selling pot greenhouse for $17M
TORONTO Aurora Cannabis Inc. has put one of its largest greenhouses — located in Exeter, Ont. — up for sale for $17 million, as the company takes steps to reduce its expenses and boost its cash balance after a series of weak quarters that have sparked jitters among investors.
“We have concluded that this non-operational greenhouse would require retrofit and significant capital investment in order to meet Aurora’s production standards,” said a statement Monday from Aurora’s vice-president of communications, Michelle Lefler.
“Aurora has taken decisive steps to rationalize capital expenditures and align our cultivation footprint to current demand, including selling the Exeter facility,” the statement read.
Last November, Aurora announced it would be halting construction on Aurora Sun — which was to become its flagship facility located in Medicine Hat, Alta. — and a massive greenhouse site in Odense, Denmark. Exeter would be the third tangible asset Aurora has decided to either offload or put on hold since the company was founded in 2015.
Aurora stock declined 5.4 per cent to $2.46 in Toronto trading in apparent response to Monday’s news. But industry analysts said the move was unsurprising given the company’s current cash needs and the fact the Exeter greenhouse was not in operation.
“Quite frankly, I would be concerned if they weren’t selling it at this point,” said Andrew Carter, a cannabis analyst with Stifel Financial Corp., who noted the company had already begun hinting that it was going to be more mindful of its cultivation capacity in light of flat domestic demand.
Carter, who has a sell rating on Aurora, added that it will take a while for it to get to the point where it is “self-sustaining ” and can “generate a positive cash flow.”
Bank of Montreal cannabis analyst Tamy Chen echoed Carter’s sentiment, calling the listing of the 164-acre Exeter facility a move that made sense, given Aurora’s current cash balance versus needs. “I’m not surprised by this announcement. I remember ever since they announced the MedReleaf acquisition in mid-2018, they were hesitant to say much publicly about their plans for Exeter,” Chen told the Financial Post.
Aurora had inherited the Exeter facility through its acquisition of Ontario licensed producer MedReleaf in mid-2018.
The $3.2-billion acquisition came with two facilities — an indoor grow-op in Bradford, Ont., that obtained a Health Canada licence in February 2019, and the one-million-square-foot greenhouse in Exeter, which Aurora intended to utilize for “R&D and extraction-based activities,” according to company statement.
Aaron Salz, founder and CEO of Stoic Advisory, a Toronto-based boutique corporate finance advisory firm, believes this trend will be limited merely to the biggest licensed producers.
“Canopy (Growth Corp.) and Aurora are the only two companies that have so many facilities. And Canopy has already been monetizing or repurposing facilities into joint ventures, for the past few years,” he said.