RE:Up In Smoke... Puff, Puff, Pass I have learned that one of the quickest ways to get an indication of any publicly traded company's legitimacy is to see how it got listed on the exchange in the first place.
Most successful companies hire a reputable investment bank and execute an IPO. This involves meeting with institutional investors who get a chance to review the company, perform due diligence and meet management before agreeing to buy the stock and become the first generation of public stockholders.
Aurora took an alternate route, going public through a reverse takeover. Reverse takeovers are often favoured by promoters, scam artists, and companies that are not ready to go public. In a reverse takeover, a publicly-traded company that usually has a failed business, but is in good standing with the stock exchange, agrees to acquire a private company while giving most of the resulting shares to the private company. This allows a private company to get listed on a public exchange without the complications and scrutiny of the IPO process. It also rarely raises any additional funding for the company. Scam companies usually take this route because they don't need money for their fictional business and mainly want access to the public market to dump worthless shares during the pump phase.
A reverse takeover (RTO) is exactly what Aurora did on the CSE in September 2014. For those who have never heard of the CSE before, it is an alternative exchange to the TSX Venture Exchange that is ignored by most investors and has less stringent disclosure requirements. That combination makes the CSE the perfect environment for pump and dump schemes to nave investors. At its peak valuation, Aurora would have represented over 50% of the aggregate valuation of all the 200+ stocks on the CSE!!!
The RTO on the CSE was enacted as Aurora was acquired by Prescient Mining and the resulting entity changed its name to Aurora Cannabis, Inc. Prescient issued 60 million shares to Aurora shareholders and replaced 21.5 million warrants and 4 million options. At the end of 2014, the new publicly traded entity reported 105 million shares outstanding. Even after factoring in the warrants and options, previous Prescient Mining shareholders received an unbelievable 43% of newly formed company (see appendix P for the source).