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Sector Hunter Masta05/30/2020 16:53

Over a billioN in losses coming for $Aurora Cannabis $Aurora Cannabis Aurora Cannabis Inc (TSX:ACB)(NYSE:ACB) is, like most cannabis companies, losing money. In its most recent quarter, it posted a $137 million net loss and an $83 million loss from operations. What’s really alarming is that Aurora is dealing with far bigger issues than that. Most notably, it has to contend with a mountain of questionable goodwill on its balance sheet. As of its most recent quarter, ACB had $2.4 billion in goodwill. Goodwill is always a fairly iffy balance sheet item, but in Aurora’s case, it’s really starting to look bad. In Q2, Aurora took $762 million in goodwill impairment charges and $210 in impairment charges on PPE. That was enough to trigger a stunning loss. Now, however, the company could be looking at an even bigger goodwill writedown–upwards of a billion dollars. The problem with MedReleaf To understand why further writedowns are almost inevitable for Aurora, we need to look at one of its biggest acquisitions: MedReleaf. MedReleaf is an Ontario-based cannabis producer that Aurora paid US$2.64 billion to acquire. At the time, that was CAD$3.2 billion. One of MedReleaf’s most noteworthy assets at the time of acquisition was an Exeter greenhouse. It was a cannabis greenhouse that was expected to produce 105,000 kilos of annual output for Aurora. Those 105,000 kilos represented the vast majority of the 140,000 kilo output MedReleaf was to produce in total. However, supply chain issues at Exeter became too big a burden for Aurora to bear, and the company wound up selling Exeter for a mere $8.6 million–a fraction of the $26 million MedReleaf originally paid for the facility. With Exeter gone, MedReleaf can only produce 35,000 kilos annually for Aurora. According to Fool.com contributor Sean Williams, that much production capacity can be bought for $100 million. How big a writedown Aurora could take If Sean Williams is correct and that 35,000 kilos in cannabis production capacity is only worth $100 million, then the vast majority of the MedReleaf goodwill on Aurora’s balance sheet will have to be written down. The company’s Q3 balance sheet doesn’t specify how much of its goodwill came from MedReleaf. However, the acquisition cost $2.64 billion. Aurora has $2.4 billion in goodwill remaining after the prior quarter’s $762 million in writedowns. These facts suggest that MedReleaf still makes up a the majority of Aurora’s goodwill. If MedReleaf’s value is written down to $100 million, then investors need to brace for another billion dollar loss at minimum. quoted from an educated investigator and investor

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boo***com·05/31/2020 21:02

and we should believe you because you're the resident idiot of what company?

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Eric Smith·06/01/2020 16:44

hunter, fingers crossed, might get promoted to shift supervisor at cinnabon.

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MrfnBeartoyouReplySector Hunter Masta·06/01/2020 14:26

man I actually love your comments always makes my mornings🤣🤣🤣

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Sector Hunter Masta·06/01/2020 00:22

Awwww poor bagholdin kitten hunta drinks yer tears 🤣😂

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Gypsy Trader·05/31/2020 15:43

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