Aurora Cannabis Stock Falls on Fake Acquisition News

It was a rough week for Aurora Cannabis (TSX:ACB)(NASDAQ:ACB) whose shares fell last week through no fault of its own. The stock has lost 30% of its value in just the past five trading days.

A selloff ensued after the company posted its latest earnings numbers, and there was news which claimed it was involved in an acquisition of a New Zealand-based cannabis company. However, that turned out to not be true. Multiple sites posted the information and Aurora would end up issuing a statement saying that it “has become aware of misinformation posted on a news website, incorrectly stating that Aurora has agreed to acquire New Zealand based MedLeaf Therapeutics.”

When there’s news of an acquisition, that typically sends shares of the acquiring company down. But in Aurora’s case, the selloff was significant. Investors may have been worried that an acquisition could further strain its financials, which aren’t all that strong and a big cash outflow may lead to more dilution in the future.

The company’s revenue for the first three months of the year rose by 34% year over year, totaling $90.5 million. Its free cash flow came in at $2.5 million, which was a big improvement from the prior-year period where that figure was negative.

Aurora’s financials did show improvement overall but it may have been news of the acquisition which spooked investors. It’s an important reminder for investors to always refer to the source and check a company’s recent press releases, as there will normally be a formal announcement relating to any significant deal.

The stock was doing well this year up until last week, but with the recent losses, it’s now down more than 7% since January.