Cannabis/hemp investments represent the most difficult sector to get right. To date, our G-101 algorithm and predecessor platforms have been right 97% of the time. Our primary prognosticator has been their Business Models. G-101 employs 27 different elements to "rate" Business Model (BM) performance on its subjective probability of success. If our formula scores below 20 positive elements, the public company in the sector will fail unless its BM is modified within our database perimeters. Nothing new here. We've been posting our findings since 2018.
On October 5, 2018, Aurora Cannbais Inc. (ACB) traded at $118.46 - it was on that date our algorithm suggested its Business Model was improperly structured, which would compromised the long term value of the investment with the likelihood of a bankrupt filing within five years. G-101 suggested that the investment should be liquidated. Today, ACB sells for $7.74.
... What ABC reported today:
Aurora cannabis sees Q4 revs below consensus; expects to recognize a non-cash write-down of goodwill and intangible assets in the range of $1.6-1.8 bln; anticipates positive Adjusted EBITDA in Q2 of FY21; appoints Miguel Martin as its new CEO (8.51)
Co issues downside guidance for Q4 (Jun), sees Q4 (Jun) revs of C$70-72 mln vs. C$76.48 mln S&P Capital IQ Consensus.
Co now anticipates positive Adjusted EBITDA in Q2 of FY21.
Co announced the appointment of Miguel Martin as its new CEO.
The Company is now operating at its quarterly SG&A run-rate in the low $40 million range, and expects operational cost reductions from facility closures up to $10 million per quarter starting in the second half of fiscal 2021. With a tailwind of growth in the Canadian recreational market, the Company is better positioned for its next phase focused on profitability.
As previously announced, and as part of the business transformation and cost reset, Aurora expects to record a number of balance sheet adjustments in Q4 2020 to recognize market realities and to position the Company for future performance.
Although the business prospects for Aurora remain strong, under IFRS, management is required to recognize the impact of overall industry risk and to consider the book value of the Company relative to current market capitalization. Accordingly, the Company expects to recognize a non-cash write-down of goodwill and intangible assets in the range of $1.6 to $1.8 billion.