Unprecedented shell math 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).
Normally a shell company with no business is only worth several hundred thousand dollars and will receive sub-5% of the pro forma company, especially if it is listed on the lowly CSE. The economic attribution to the Prescient Mining shareholders appears suspiciously high, but perhaps it is just a reflection that the founders of Aurora had no real prior experience running publicly-traded companies. This type of economics would reflect a hefty fee just to get Aurora public. The CEO of Prescient, Marc Levy, remained as director of the new company...at least for a short period of time. Levy and his associates likely held a significant portion of the 43% of the resulting entity, which would have provided ample incentive to aggressively promote Aurora in order to drive the share price higher.
Unprecedented shell math
The private placement was conducted during the "due diligence phase," which, in itself, is quite unusual in its magnitude. Levy was also aggressive in announcing that the shell Prescient Mining approved an up to 10-for-1 consolidation of its shares just weeks before it got involved in Aurora (Source). There is no better trick in the book to encourage shareholders to sell. The stock was trading at $0.03/share at the time.
Also, according to the filing statement:
"Immediately after close of the Share Exchange, the Aurora Shareholders hold approximately 57.1% of all issued and outstanding the Resulting Issuer Shares."
This implies that almost 43% of the shares went to the shell company holders.