This past week saw Australis Capital Inc (CNSX:AUSA) begin to trade their shares on the Canadian stock exchange; a major feat for the company. Over the past few years, the company has operated in the shadow of Aurora Cannabis, majorly because they are a subsidiary of the cannabis producer and distributor. This follows a deal reached between the two companies and AJR Builders Group, LLC back in 2015 which would see them build a new facility within Canada and further see shares of Australis distributed to their shareholders this year.The aforementioned shares were distributed earlier this week; as a result, the company’s share price has spiked, allowing for their shareholders to double down on their stake; further sending their share price soaring higher.However, the oversubscription to their shares drove them up for only so long as the shares begun plummeting between CAD $14.5 when trading began and dropped nearly 70% over a period of 2 days. During this period, the share price stabilized between a CAD $3.1 and CAD $3.9. Currently, the company’s share price has reached a price of CAD $3.16.Given the above downward trend and consecutive stabilization in share price, we decided to take a look at the company and analyze the above surge and decline on the basis of the performance of Australis over the past few years. Through this, we would obtain the return metrics they were working with and postulate their future performance for shareholders. The following report was thus obtained.
Australis Capital Inc: An Overview
Australis Capital operates in the investment wing of Aurora Cannabis. The firm operates by investing in either equity or debt in acquisitions and providing financing for royalties for different companies operating in cannabis predominantly within the US as well as in the real estate segment of the same industry and country. The firm’s strong corporate governance objectives set the stage for their investment criteria set for their investees; further strengthening the mid to long-term investment horizon. Furthermore, the meticulously crafted team brings a wealth of experience to the table, ensuring that they only invest in high-quality investments all in a bid to boost shareholder value.With such a company in hand, Aurora Cannabis opted to begin trading their shares in the stock exchange. This was all in a bid to ensure their shareholders – themselves and new shareholders – benefit from higher valuations associated with the stock exchange, all of which happened upon commencement of trading. However, a few hurdles were faced on the first day of trading, all of which are discussed in this piece.
The Deal That Was
Back in 2015, Australis Capital and Aurora Cannabis entered an agreement which would see the production capacity of Aurora grow immensely.During this period, Aurora Cannabis had provided $1.6 million to their subsidiary which would see the firm purchase two parcels of land – about 24.5 acres – located in Whatcom County, Washington valued at $2.3 million. With the land located in the US, the strategic goal of the company was to ensure that that ventured into the country by constructing a marijuana production and processing facility in the region which would meet the specifications of Aurora Cannabis as well as those of regulators. Given this, the company looped in AJR Builders Group, LLC whose prowess in such projects was unparalleled.With the Washington area having received millions of tourists over the years who further spent $573 million – back in 2015 – the firm was certain that they would recoup part of their investment through trips to the region. As a result, they opted to organize trips to the warehouse for guests interested in the production of cannabis and in turn, develop their market. In their view back then, they would benefit greatly from the partnership they had forged during the period. In the words of the AJR Builders CEO:
“All producers will be expected to uphold the Aurora Standard as it pertains to the recreational and medical markets in Washington... The concept of multiple cannabis producers and processors in one location will give our partnership the ability to cultivate the highest quality strains of cannabis. We can start generating revenues within 90 days.”
Source:The positivity expressed by the management spoke to expected success over the coming periods. Since then, however, little news has been forthcoming. However, with Aurora Cannabis succeeding in its endeavors, the entire project seems to be riding their wave of success.
Australis Begins Trading
As at 19th September 2018, Australis Capital Inc began trading on the Canadian Stock Exchange. This was as a result of Aurora Cannabis distributing the firm’s common shares and warrants to investors and listing them on the platform.The move was expected to ensure the firm’s shareholders benefited from higher while further underscoring their bid to venture into and invest in the US cannabis market. This is expressed by their Chief Executive Officer, Scott Dowty who stated:
"We are laser focused on creating shareholder value through disciplined execution, operational expertise and a go-to-market strategy fuelled by defined growth vectors."
Source:However, later that night, trading was temporarily halted by the Investment Industry Regulatory Organization of Canada (IIROC). IIROC cited an imbalance of orders as the reason for their halt, stating that trading is expected to resume soon despite this.It is expected that the next week will bring better tidings to AUSA and that their share price will rise as a result. With their project still on course and with them having the ability to raise capital over the stock markets, AUSA is at a pivotal position to ensure their growth in the US market remains unhampered.
Conclusion
With the firm having listed on the Canadian Stock Exchange and operating in a growing industry, AUSA is expected to grow immensely over this year. Despite their current hiccup, the firm is expected to grow further into the coming period and continue to provide value to its shareholders going forward.We will be updating our subscribers as soon as we know more. For the latest updates on AUSA, sign up below!Disclosure: We have no position in AUSA and have not been compensated for this article.
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