Article by David George-Cosh, BNN Bloomberg
There are a few things that still keep Terry Booth up at night.
Aside from the Aurora Cannabis Inc. chief executive officer’s seven-month-old daughter, which he dutifully dotes on, Booth can’t help but shake his company’s stock performance as of late.
“As the CEO, you really want to know how the market is differentiating us,” Booth said in a rare, wide-ranging interview with BNN Bloomberg. “I am less worried about [cannabis] demand, obviously.”
While Aurora’s stock has indeed suffered, trading down 51 per cent over the past year, Booth continues to remain optimistic on the company’s prospects. He highlights how the U.S. remains a crucial market for its CBD product ambitions, while reiterating a firm focus on governance and managing its finances to retain investor confidence in an industry beset by steep losses.
And there might be more turbulence to come.
Booth said there could be “carnage” in Canada’s cannabis industry over the next year if some producers remain unable to drop their cost of producing their cannabis amidst what has become an oversupplied market.
Canopy Growth Corp. and Tilray Inc. are two leading cannabis producers, which, according to Raymond James analysts, have high production costs per gram, while Aurora has turned itself into a low-cost player, joining Organigram Holdings Inc. and Village Farms International Inc.
“I think you’ll see some carnage in the production area when people are growing it for $4 and $5 a gram, [when] we’re doing it for less than a buck,” Booth said. “We’re not going to want to get into any price wars but if the market does go down in pricing because of oversupply, we’re best prepared to deal with it.”
Booth said the company’s US$400 million at-the-market equity financing program it secured earlier this month will give the pot giant some agility to handle its operations during the current downturn, which is something that most of the market may not be able to stomach in the coming months.
“[Banks] threw money around like it was spaghetti,” he said. “These companies that never stopped thinking money was going to be available to them [forever] are going to be in a world of hurt.”
Meanwhile, Booth has put his own money where his mouth is, snapping up 270,000 Aurora shares earlier this week for nearly $1 million, a move he said is aimed at showing investors he remains confident in the company’s business, despite what the market thinks of it.
“Remember, they used to value our companies based on the size of our vault and then based it on the size of our licence, and then they based on the funding capacity and they’re finally moving towards can these guys make money,” Booth said.
“It’s going to wash itself out and common sense normally prevails. The timing of that common sense is imperative for us to properly adjust our business operations and put our big boy and big girl pants on to make sure that we run it like a business – and that’s what Aurora intends to do.”