Last week, Aurora announced the acquisition of Thrive Cannabis for approximately $38 million. Such news was bound to cause quite a stir in the cannabis industry, especially in light of Aurora’s recent financial performances. In a release about the announcement, the Canadian LP CEO Miguel Martin said: “This transaction supports our path to profitability while ensuring that we are strategic in our M&A activity. Thrive’s achievement of positive standalone EBITDA, combined with their exceptional operational and brand capabilities, truly set them apart, and we look forward to leveraging their expertise as we embark together on Aurora’s path to profitability.” Yet reactions to the announcement weren’t all as positive as the tone of the press release.
According to Marc Collins’ (President of Highly Capitalized) LinkedIn post, it will be challenging for Thrive to prove to their customers that they are not “selling out to the bigger, less popular Aurora.” Thrive CEO Geoff Hoover ensures that this is not the case. “We’re not going to sell out—this allows us to raise brand awareness, introduce new items to the market, and reach consumers we could never reach before.” Still, it is Thrive’s consumers’ reactions that will determine the consequences, Collins explains. “If Thrive's consumers don't like the deal, Thrive could wind up being lost in the mix—in the much bigger Aurora.”
On Reddit, consumers’ reactions were not all positive either. For example, one commenter, who is a shareholder in Thrive Cannabis, shared his disappointment. “I am not pleased with the deal. I would have rather had that Thrive stayed independent, as they have year on year growth in revenue and popular premium products. They are getting bought at a time when cannabis valuations are depressed and now if the deal goes through, I’ll have to ride any upsides to Aurora.”
The right time?
“From a business sense, this may have been the right time for Thrive,” says Lenny Kerman (VP Sales and Business Development at C3 Agency), after also explaining some of the risks. “Thrive has been the darling of the industry for a while, and in an ever-changing market, they may have felt they were playing with house money at this point. It may have just been time to take some of those winnings off the table and reduce the risk of losing that momentum.”
“Whichever way you see it, the road ahead may be an interesting one for both Aurora and Greybeard,” Kerman continues. “From the cap markets sense, Aurora has been beaten up. A lack of direction, not enough revenue, and no real future. On the other hand, people love Thrive. I don’t know how this shakes out but it’s really interesting watching this one from the sidelines.”
Some people are perceiving the acquisition in a more positive light. Sean Samuel (VP Sales & Marketing at Cannabis OneFive), for example, has high hopes for the acquisition. “We’re encouraged by the fact that one of the ‘big box’ LPs sees the value in learning how to grow AAAA bud at scale, from one of the best in the business. In a year with mid-term elections (likely very little meaningful policy reform) and with valuations on the 'cheap' side, I expect the consolidation theme of 2022 to continue. With that in mind one of the biggest challenges in the sector remains integrating new assets into the core operation and harmonizing two distinct cultures across the newly-formed entity,” Samuel adds.