So I decided to vet the details of this hackjob Aurora short report released yesterday: http://harvestmooncannabis.ca/aurora.pdf. Before I start I just want to say whoever wrote that report needs to work on their grammar.
Anyway I took at look at some of the balance sheet items BB was referencing and made the observation that Aurora has a lot of goodwill on their books. About $2.8B. They also have about $600M in intangible assets. This is in addition to other speculative assets like investments in associates and derivatives, which BB covers in their report. All told it's about $3.8B.
Wondering how this compared to the rest of the sector, I thought I'd put together a quick and dirty analysis. Here it iis: https://i.imgur.com/jggchhX.png.
Aurora - $3.84B = 36.5% of diltuted market cap
Aphria - $1.22B = 37.0% of diluted market cap
Canopy- $1.56B = 4.95% of diluted market cap
Cronos - $18.2M = 0.16% of diluted market cap
Tilray - $1.4M = 0.013% of diluted market cap
It's pretty eyeopening to see what a large percentage resides with Aphria and Aurora in terms of market cap. It's pretty obvious that the large goodwill/intangibles balances belong to the companies that have done the most/largest acquisitions. There will almost certainly be large writedowns/impairment against these balances come future earnings reports.
Ontario's retial fiasco stands out as an obvious trigger for a writedown. HIKU (Canopy) and Alcanna (Aurora) both greatly affected. Basically any retail investments should be affected by the incredibly bad situations in Ontario and Quebec. That's just off the top of my head. Constellations already took a writedown on the Canopy investment. Considering how little revenue these operations are generating vs. their hefty acquisition price tags I wouldn't be surprised to see writedowns in the immediate future. This could be a reason why Aurora is promising profitability in the very short term (to avoid having to impair theae huge balances). I personally don't see it in the timeline they've given. Very ambitious considering all the depressed sales stats we're seeing.
Other events I can see would be the revelation that Aurora's MedReleaf acquisition won't be producing in anywhere near the sq footage described as part of the acquisitions. The 100,000kg they attribute to MedReleaf Exeter will likely never be built out.
Submitted February 08, 2019 at 09:01AM by FootballThrowAvay http://bit.ly/2GxawvA
