Aurora Sells C$86.5 Million Worth of Remaining TGOD Shares

Shares of Aurora Cannabis (NYSE:ACB,TSX:ACB) jumped on Wednesday (September 4) after it announced the sale of C$86.5 million worth of its remaining shares of The Green Organic Dutchman (TGOD) (TSX:TGOD,OTCQX:TGODF). 

The Alberta-based cannabis giant opened at C$7.71 on Wednesday, jumping almost 2 percent from its previous close of C$7.57 on Tuesday (September 3).

The announcement came after market close on Tuesday. According to reports, the cannabis firm has relieved itself of over 28 million TGOD shares for C$3 each, representing a 10.5 percent stake.

TGOD’s closing price was C$3.51 on Tuesday, resulting in a discount of 14.5 percent for Aurora. Its shares dropped sharply to C$3 at opening on Wednesday, matching Aurora’s sale price, before dropping further to C$2.96 by 10:20 a.m. EDT.

Aurora said that, while it no longer holds any shares of TGOD, it will retain the warrants to purchase over 16 million shares of the Ontario-based grower. Aurora also said the sale has raked in a 50 percent internal rate of return for the company.

Aurora CEO Terry Booth said in a press release that Aurora regularly adjusts its alignment strategy to maximize yields from its investments.

“When we acquired Whistler Medical Marijuana Corporation — an iconic and premium organic cannabis producer — our interest in TGOD became less important to our core strategy,” said Booth.

Aurora’s all-share acquisition of Whistler brought the BC-based cannabis brand into Aurora’s portfolio back in March of this year.

The sale ends a long relationship between the two firms tracing back to January 2018, when Aurora first announced a strategic investment in TGOD as well as a supply contract.

Initially, Aurora acquired over 33 million units at C$1.65 each for a total value of C$55 million. The deal also gave Aurora the right to buy up to 20 percent of TGOD’s annual cannabis yield from two of its production facilities.

Aurora furthered its stake in May last year when it invested C$23.1 million as a part of TGOD’s initial public offering, purchasing 6.3 million units for a total of 39.7 million common shares.

TGOD responded to the sale on Wednesday before markets opened, saying it will improve company’s revenue and gross margin mix as it frees up the organic cannabis previously being sold to Aurora as a part of the original supply agreement.

“This is the right next step in the relationship as both companies mature and our respective strategies evolve,” said TGOD CEO Brian Athaide in a statement.

TGOD added that Aurora played a crucial part in its early development, including the initial building of its production facilities.

The sale follows an announcement on Tuesday from TGOD stating the company has received approval from Health Canada to start operations at its facility in Hamilton, Ontario. It also follows the company’s first shipment of cannabis to the Ontario Cannabis Store in August, marking TGOD’s introduction into Canada’s recreational marijuana market.

TGOD reported revenues of C$2.9 million but losses of C$16.6 million for the second quarter this year. The company attributed the loss to the cost of setting itself up to commercialize its products in Canada and abroad.

One of the company’s international moves is a deal between Mediakos and TGOD’s subsidiary, HemPoland, to distribute its cannabidiol brand to pharmacies in Germany.

Some of TGOD’s biggest shareholders apart from Aurora are ETF Managers Group and Horizons ETFs Management, both of which have cannabis exchange-traded funds with holdings in TGOD.

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Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.