Aurora CEO Gets $6.7 Million

Aurora Cannabis Inc.’s CEO is getting a 38 percent raise to $6.7 million amid cost-cutting and share slumps.

Aurora Cannabis is trading 99% below all-time highs, making it one of the worst-performing companies on the TSX. The company’s shares lost 52 percent of their value in fiscal 2023. But this guy gets a 38 percent raise.

With a market cap of $240 million, what would possibly justify the Aurora CEO getting $6.7 million?

Aurora CEO Gets $6.7 Million

Aurora’s CEO, Miguel Martin, joined the company in September 2020. Over the past three fiscal years, he’s made $16.1 million in compensation while the company has lost $2.6 billion.

In an email to The Globe, Aurora said, “Corporate performance metrics were either met or exceeded, which is reflected in the annual short-term incentive pay component of total compensation.”

Whether that’s true or not – investors are spooked.

Consider Aurora’s biggest miscalculation to date: that large, “sea-of-green” grow facilities were the wave of the future.

On the eve of legalization, they had a $2-billion market cap. So they bought up everything they could: nutrient companies, greenhouses, and smaller cannabis companies like CanniMed and MedReleaf.

Aurora even built a 75,000-square-metre greenhouse they (incorrectly) believed would supply a third of all Canadian cannabis.

But it turns out Canada’s cannabis consumers prefer mom-and-pop craft cannabis. Aurora Cannabis has never been profitable.

They recently closed a production facility in Denmark, sold one in Medicine Hat, and they’re shifting their focus to medical cannabis.

While the Aurora CEO gets $6.7 million, the company reports losses. Aurora expects positive free cash flow by the end of fiscal 2024.

Aurora CEO Gets $6.7 Million – How?

How do Aurora and its CEO justify a $6.7 million compensation amid cost-cutting and share slumps? Probably the same way they justified their visions of legalization – by appealing to fantasy.

Licensed producers like Aurora overestimated demand, oversupplied products, and in the process, destroyed profit margins.

Thrown in the fact that Canadians weren’t eager to abandon their “illicit” supply of cannabis farmers and vendors, you’ve got the perfect storm: Multi-billion-dollar write-downs and cumulative operating losses. 

Between 2020 and 2022, Aurora Cannabis reported losses of nearly $1 billion.

Aurora has raised equity capital numerous times, diluting shareholder wealth. Company-wide layoffs are the norm as the cannabis producer scales down its operations.

Hence, the shift to higher-margin medical cannabis. Still, the company loses money.

Is Now the Time to Buy Aurora Shares?

Putting aside the fact that the Aurora CEO is getting $6.7 million amid cost-cutting and falling stock – is now the time to buy Aurora stock?

They say it’s darkest before dawn.

Aurora expects to be profitable by the end of fiscal 2024. They’ve certainly been aggressive in their reorganization. In fiscal 2023, Aurora Cannabis reported a sales increase of 27%.

According to the company, the Aurora CEO’s $6.7 million deal is linked to Aurora’s share price and corporate performance metrics.

So is the point where the company turns itself around? Aurora has promised to achieve positive free cash flow before. What’s unique about this time?

Analysts expect the loss per share to narrow in 2024. What’s motivating them is the potential of European cannabis markets.

Aurora Cannabis is well-established in Europe, with a presence in Germany and France.

Still, Aurora Cannabis Inc.’s fundamentals are weak. They are a high-risk investment. There are other cannabis companies (especially south of the border) that are much better buys.

That said, some analysts expect to see the Aurora stock gain by 40% in the next twelve months. Which may or may not justify Aurora CEO’s $6.7 million compensation package.