On March 13, 2019, Aurora Cannabis Inc. (ACB) announced the appointment of activist investor Nelson Peltz to its board of directors. Peltz is the founder and CEO of Trian Partners, a New York-based hedge fund focused on activist strategies.
According to the press release, Peltz in his role as strategic adviser will advise Aurora on its global expansion strategy as he also helps it to identify potential partnerships to facilitate expansion into various new market segments.
Peltz and Trian have decades of experience targeting public companies they believe to be undervalued, then maneuvering management decisions in an attempt to improve company value for shareholders. The consumer goods expert is likely to adopt a similar activist-type strategy to identify growth opportunities for Aurora going forward.
"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," said Aurora CEO Terry Booth.
Aurora and Beyond
The news of Peltz joining Aurora was celebrated by investors. ACB shares closed up 13.94% in response and were over 1% higher during pre-market trading the following day.
Aurora is an Alberta, Canada-based cannabis company and one of the largest and most prominent publicly-traded businesses in its industry. As with most other public cannabis companies, Aurora is interested in capitalizing on regulatory changes around the world which are allowing for the legal production and sale of marijuana, in many cases for the first time.
A key to gaining dominance in the nascent industry is an effective and assertive growth strategy. Aurora has so far established its own production facilities and distribution capabilities, all with an eye toward scalability. The company has also emphasized mergers and acquisitions (M&A) as a key component of its growth strategy as well; as of this writing, Aurora has 16 wholly owned subsidiary companies.
Peltz may be a particularly strong choice among money managers for the strategic adviser role as his expertise in the consumer goods industry is widely regarded. Trian Partners has a long history of investments in companies like Procter & Gamble (PG) and Mondelez (MDLZ). Peltz may help Aurora to access a variety of markets beyond cannabis and the current panoply of cannabis products. For instance, Michael Singer, Aurora's executive chair, explained to CNBC's Squawk Box that his company had considered the beverage industry, cosmetics, wellness, pharmaceuticals, and many other segments for future integration.
But It's possible Peltz's impact will be much greater than helping just Aurora's bottomline.
He revealed in the press release that he believes "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."
Despite marijuana still being illegal at the federal level in the U.S., the cannabis industry here and overseas is poised for explosive growth, according to market analysts. But the new industry is still in need of branding experts, especially considering the stigma attached to pot.
With Peltz advising Aurora, we may be able to see the first mainstream cannabis brand, said Michael Cammarata, founder of Random Occurrence, according to MarketWatch. "There’s been a lot of focus on extraction, or farming or the licenses and international markets, but not really on building a brand," he said.
The endorsement and involvement of someone as high-profile and with as much experience in the food industry as Peltz can help cannabis disrupt other industries, gain it more acceptance and possibly inspire others to see it as a good investment opportunity.
Reuters columnist John Foley also pointed out that Peltz's presence at Aurora may make financial companies like Goldman Sachs, which aren’t yet advising cannabis companies directly, "a fraction more comfortable." Wall Street banks have been wary of the industry due to murky regulations.