The past year’s been tough for pot stocks — and it has been especially tough for Aurora Cannabis (NYSE:ACB). Many great cannabis plays have seen big declines in their share price. Aurora stock plummeted over 90% at one point from its 52-week high of $9.05 per share.

Yet, even after its reverse stock split, expect shares to fall further. I am bullish on many pot stocks, but not Aurora. Why? With continued losses, and the need to raise more capital, the Canadian pot company’s prospects don’t look good.

How about recent management changes in the past six months? Too little, too late. Both executives needed to go a long time ago. When the global economy was firing on all cylinders, perhaps a change of the guard would’ve helped.

But now, with novel coronavirus headwinds thrown into the mix? Forget about it. Worldwide economic slowdown means the company’s financial health could deteriorate further. Put it all together, and it’s clear Aurora stock remains a sell.

Why Aurora Stock Isn’t Your Best Pot Play

Despite recent hiccups, the cannabis space still has strong prospects. But don’t expect things to improve long term for Aurora.

Why? Firstly, it has bad management. The company jettisoned its CEO and co-founder, Terry Booth, in February. This came after another key executive left in December. Both needed to go a long time ago, given the company’s poor performance relative to peers.

Putting a new CEO at the helm is a step in the right direction. Yet, it’s too late. Stronger rivals are pulling ahead, leaving moribund Aurora in the dust. That brings us to the second key reason why this isn’t your best pot play: weak top-line results.

In the quarter ending December 2019, sales fell 26% from the prior three-month period. The company’s outlook implied modest to zero growth for the quarter ending March 2020. And this was back in February, before Covid-19 headwinds were factored into guidance.

Granted, this isn’t a problem exclusive to this company. Oversupply issues have even affected stronger cannabis stocks like Canopy Growth (NYSE:CGC).

But, this headwind has had more of an impact to Aurora’s underlying performance. And now, with the coronavirus, the company faces more difficulty boosting sales. For example, shelter-in-place orders have meant its Ontario retail locations are closed, cutting off a key source of sales growth.

Third, and finally, Aurora stock remains a hard sell due to its extremely weak balance sheet. Quickly burning through the proceeds from last year’s equity raise, the company is looking to raise more money.

This could help the company ride out the pandemic. Yet, expect subsequent stock offerings to further dilute Aurora shareholders. In short, there’s many reasons why the stock could fall further, even if the reverse split temporarily takes it out of penny-stock territory.

The Stock Split Won’t Solve These Issues

As mentioned above, the company completed a 1-for-12 reverse stock split on May 11. In other words, based on the May 6 closing price of 69 cents per share, shares were worth $8.28 after the transaction.

Obviously, that doesn’t mean your investment skyrockets overnight. You simply go from owning 12 shares worth 69 cents each, to one share worth $8.28. Why is the company doing this, if it doesn’t help move the needle?

It’s a matter of necessity. The company needs to keep its stock price above $1 per share in order to continue trading on The New York Stock Exchange. In the short term, this prevents a precipitous drop, as delisting means many shareholders exit out of the stock.

Yet, this isn’t even a band-aid for the company’s underlying issues. With Aurora burning through cash, and looking to raise more via a stock offering, investors should expect further declines thanks to dilution.

With dilution, the pie will become split into many more slices. That means, even if the company manages to improve its performance, the potential rise in the share price is minimized.

So, why is Aurora diluting shareholders? It’s the lesser of two evils. Otherwise, without additional capital, the company is fast headed toward bankruptcy, wiping out the value of shares completely.

With prospects like these, it’s even more obvious why this isn’t a great opportunity.

Aurora Stock Remains a Hard Sell

Despite recent troubles, I remain bullish on the cannabis industry’s overall prospects. But that doesn’t mean I’m a fan of this particular stock. With weak fundamentals, the company’s dire need to raise more money and a stock split that will do little to improve these underlying issues, there’s no reason to buy shares today.

Bottom line: Continue to avoid Aurora stock, and consider other opportunities (like Canopy Growth) instead.

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