RE:HmmmmHomestretch4me wrote:
How, exactly, does Aurora Cannabis let perhaps the best-known beverage maker walk away from even casual talks without a deal? While no one aside from the executives of both companies knows that answer with any certainty, I can venture an educated guess. My suspicion is that Coca-Cola was gun-shy about making an investment into Aurora Cannabis because of the company's growth-by-acquisition strategy. Prior to the legalization of adult-use weed in Canada this past October, most pot stocks had their hands tied when it came to raising capital. With non-dilutive offerings from banks mostly off the table, marijuana stocks like Aurora Cannabis frequently turned to bought-deal offerings to raise money. In Aurora's case, it would use its common stock as the collateral needed to complete acquisitions. For instance, its roughly $2 billion buyout of MedReleaf meant the issuance of more than 370 million shares, while the purchase of CanniMed saw close to 73 million shares issued. Why does this matter? The simple answer is that, if Coca-Cola were to make an investment into Aurora Cannabis, which is possibly something Aurora's management was pushing for, its equity stake in the company would continually be diluted by Aurora's growth-at-any-cost strategy. We've already witnessed the company's stock drastically underperform in relation to its market-cap growth as a result of share-based dilution, and it may very well have been the linchpin that also drove Coca-Cola away back in September.
They didn’t want to sell controlling interests. Only benefits short term shareholders. They didn’t want to drop there pants to the first buyer. To early in the game for that. Grow organically first. Then partner and always keep controlling interests. Common sense pretty much