Why Aurora Cannabis stock couldn't catch fire today

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Investors weren't cheered by yet another round of capital-raising by the Canadian pot company.



What happened

In the habitually money-losing marijuana industry, new stock issues are a way of life for companies constantly hungry for fresh capital. While investors are accustomed to this, they don't particularly like it. Case in point: On Tuesday, Aurora Cannabis (ACB -3.40%) declined 5%-plus after it announced the closing of its latest issue.

So what 

Aurora said that morning that it has raised gross proceeds of roughly $172.5 million from the issue, which technically isn't a stock flotation.

Instead, it has issued "units," comprised of one common share of the company's common stock and one warrant exercisable for a single common share. Those warrants are exercisable for 36 months following the closing date of the issue at a price of $3.20 apiece. Aurora cautioned that the price is adjustable should "certain events" occur. It didn't get more specific.

The company said it will utilize the proceeds of the offering for "general corporate purposes." It added that following the issue, it believes it will no longer need to tap its previously announced at-the-market equity offering. Around $186 million is still outstanding from that initiative.

Now what

Given the unpopularity of the chronically unprofitable marijuana sector, it's very possible that Aurora's share price won't hit that $3.20 exercise price of the warrants. At the moment, the stock trades for less than half that amount.

But even if it doesn't, the new shares that comprise the units will further dilute a company with a share count that's ballooned over the past few years. It's no wonder investors are unhappy about this latest issue.

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