what happened
shares Aurora hemp (ACB 0.89%) It fell as much as 22.1% this week, according to data from S&P Global Market Intelligence. The international cannabis producer saw its shares fall after US lawmakers again delayed a vote on nationwide cannabis reform. As of the market close on Friday, December 9th, shares of Aurora Cannabis are down 19.3% for the week.
so what
This week, the US House of Representatives voted on the massive annual budget for the Department of Defense. In the run-up to the vote, analysts had hoped that cannabis reform would be added as part of the defense package, but this did not happen. With time running out for this current Congress, it seems more and more unlikely that any cannabis legislation will ever be passed into law. Cannabis investorslikely disappointed to see these developments, sold shares of Aurora Cannabis this week.
What is this cannabis law, and why is it so important? First, it is not about the nationwide legalization of cannabis, although this has been suggested many times.
The bill, called the Safe Banking Act, would remove federal restrictions on banks and lending institutions providing loans to cannabis companies. These restrictions have made it difficult for cannabis companies like Aurora Cannabis to raise cash to fuel growth, forcing them to take out high-interest debt and preferred loans from second-tier lenders. If the SAFE Banking Act is passed, the cannabis business will be able to operate more efficiently.
This should help companies like Aurora Cannabis increase their production through low-cost debt, allowing them to build up supplies for more statewide marijuana legalization — and eventual nationwide legalization, which now has bipartisan support. But it appears that the finish line for this law may be pushed back to 2023.
What now
Shares of Aurora Cannabis have fallen a whopping 96% over the past three years as investors have become extremely pessimistic about the cannabis industry. The company’s market capitalization is now only $365 million; That might look very cheap a few years from now if it’s able to become one of the leading global producers of cannabis, with the industry approaching $30 billion in annual turnover. However, Aurora Cannabis is currently very unprofitable, resulting in a net loss of $52 million on revenue of just $49.2 million in the most recent quarter.
Aurora cannabis stocks are at rock bottom. When you consider the size of the cannabis market along with how much money the company is losing right now, the stock looks like a high-risk investment with a lot of upside potential.
Brett Schafer He has no position in any of the aforementioned shares. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a Disclosure policy.
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