Aurora Cannabis (ACB) stock is breaking out after adding activist investor extraordinaire Nelson Peltz as a strategic advisor.
Shares of the Edmonton, Alberta-based cannabis company surged as much as 13% in pre-market hours, implying the highest open in about five months before cooling down slightly.
"Nelson is a globally recognized business visionary with a strong track record of constructive engagement to generate accelerated, profitable growth and shareholder value across many industry verticals that are of great interest to us," Aurora CEO Terry Booth explained. "Like us, Nelson also takes a long-term view of value creation to benefit all stakeholders. We look forward to working with Nelson to further extend our global cannabis industry leadership by aligning Aurora with each of the major market segments cannabis is set to impact."
The investment in Aurora is somewhat anomalous not only because it is Peltz's first foray into pot stocks, but also because it is not a mature company with a proven track record, like P&G for example.
Nonetheless, Peltz touted Aurora's differentiation from industry peers as his primary motivation for investment that comes outside of his core track record in consumer packaged goods.
"I believe Aurora has a solid execution track record, is strongly differentiated from its peers, has achieved integration throughout the value chain and is poised to go to the next level across a range of industry verticals," Peltz said in the release. "I also believe that Canadian licensed producers, and Aurora in particular, are well positioned to lead in the development of the international cannabis industry as regulations evolve, with a strong, globally replicable operating model."
The deal is also sweetened for Peltz by an options grant that will allow him to purchase 19,961,754 common shares in the company at a price CAD$10.34 ($7.74) per share. The grant holds certain restrictions and is stated to vest over four years.
The stake could be vested in an accelerated fashion based upon pre-agreed targets "which include the consummation of certain defined transactions, and the closing price of Aurora's common shares being at least CAD$31.02 ($23.22) and additionally CAD$41.36 ($30.96) for a specified number of trading days.
Full details on the "certain defined transactions" were not disclosed, but given the track record Peltz has in advising consumer packaged goods companies, the speculation will certainly be widespread on Wednesday.
Aurora Cannabis is a holding in TheStreet's Stocks Under $10 portfolio. Click here to learn more about this portfolio, trading ideas and market commentary product.
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