Aurora Cannabis (ACB) has made headlines as one of the fastest growing cannabis companies in the world. It’s flashy branding and incredibly well-spoken management have taken poll position in an increasingly competitive industry. Imagine just how hard it is to create a competitive company in any agricultural product. Your chances of becoming the next Dole for bananas is almost slim to none. By the time you experience any growth, you’re already pushed out of the market by big producers with cheaper prices and quicker delivery. But Aurora found its way to the top through a global portfolio of acquisitions and strategic partnerships.
Aurora is betting on the fact that any company with the most market share (globally) will build the foundation for stability and dominance over time. Just like Facebook and Google dominate their space through integral penetration of almost all the market, Aurora Cannabis may be the top cannabis company globally if their growth continues as planned. And they definitely plan to do so.
But how did they dominate the market so quickly and drastically? Simple answer is: they were smart from the beginning. Aurora has been planning a global-focused strategy since they started in 2013. They also understood that the cannabis hype would create incredible equity for their company within a few short years. By capitalizing on over-extended share growth, they started early and made big moves quickly by diluting shareholder equity to purchase more market share. Why keep a high stock price while sacrificing potential growth? Aurora knew their best bet was to cash in and globalize their company fast. Sacrificing stock value for market share and growth.
Step by step Aurora started buying up the market. It also did a lot of procurement by buying up services within its supply chain. In Nov 2017 it launched a bid to CanniMed through an all-stock hostile takeover. This was the first hostile takeover in the cannabis industry. By March 2018, it finalized the acquisition. By doing so, Aurora gain 42,000 registered cannabis patients in Canada. In May 2019, it planned a friendly takeover of MedReleaf. This was a significant step towards globalizing Aurora. MedReleaf was incredibly value for Aurora. It brought with it distribution agreements for a number of countries including Germany, Italy, Brazil and Australia. Aurora’s intentions were clear: total market penetration and dominance.
Additionally, Aurora also owns Pedanios GmbH, a distributor, exporter and importer for medical cannabis in the European Union and it’s 28 member states. Based in Germany, it’s a prime location in the middle of Europe with supply lines to incredibly lucrative (potential) markets such as Poland and others.
Why is this all important as a shareholder? Cannabis companies with limited global outreach will eventually get pushed out of the market by companies like Aurora. Therefore, globalization is key and incredibly important for investors. Companies like Aurora set themselves apart from others through their ability to understand the actual size of the market. This is important in a globalized world built on trade relationships with hundreds of millions of potential customers in different countries. It can also be a burden to shareholders who have shares diluted for growth. What’s most important is the strategy and people behind the company. With a company like Aurora, you know what you’re getting yourself into as a shareholder. Its a company built for the long-term investor willing to sacrifice for the betterment of the entire company in the future.
To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here.
Disclosure: The author has a Long position in Aurora stock.