The 3 most important things to know – Motley's Fool

Aurora Cannabis (NYSE: ACB) seems to be on a roll. The second largest marijuana producer in terms of market capitalization captured 20% of the Canadian leisure market in the last quarter. Aurora began shipping this week lucrative cannabis oils to Germany, the largest marijuana market outside of North America. And now, Aurora has hired a billionaire.

The company has appointed Nelson Peltz as a strategic advisor to help him explore potential partnerships. The Aurora stock price jumped up to 16% early in the news session.

What's wrong with Peltz teaming up with Aurora Cannabis? Here are the three most important things you need to know.

1. Who is Nelson Peltz?

Peltz is the founder and CEO of Trian Fund Management, a multi-billion dollar investment company. Trian holds significant holdings in several large companies, including a packaged food business. Mondelēz, giant consumer goods Procter & Gamble, wholesaler of food products Syscoand the fast food chain Wendy. Peltz is Chairman of Wendy's Board of Directors and a member of the Board of Directors of P & G and Sysco.

Peltz was also CEO of Triarc Companies. During his tenure at Triarc Bar, the company owned, among others, the groups Arby's Restaurant and Snapple Beverage. Earlier in his career, Peltz was CEO of metal components manufacturer Triangle Industries.

In his current role, Peltz became known as an activist investor. He led Trian to invest in public companies that appeared to be undervalued, and pushed the management teams of these companies to implement changes to unlock the value of their shares.

2. Why this is a big problem for Aurora

Aurora Cannabis has it all: the company boasts a leading production capacity in the industry and its international operations rank among the best for Canadian marijuana growers. But unlike rivals Cover growth, Cronos Group, and TilrayAurora does not have a major partner outside the cannabis industry.

The absence of a major partner has disadvantaged Aurora, particularly compared to Canopy Growth. A $ 4 billion investment from a manufacturer of alcoholic beverages Constellation Brands provided Canopy with a large stock of money to use for expansion; Aurora would love to have such a good cash to finance its expansion efforts.

Aurora Cannabis clearly hopes that adding Peltz as a strategic advisor will improve his chances of attracting a great partner – and he may find more than one.

Terry Booth, CEO, said Aurora was looking forward to working with Peltz to "further strengthen our global leadership in the cannabis industry by aligning Aurora on each of the major segments of the cannabis market, which should have a impact". The segments referenced by Booth include beverages, cosmetics, pharmaceuticals and wellness products.

Peltz's comments confirmed that he was considering actively seeking partners for Aurora. He said his collaboration with the company would include "a potential engagement with mature players in the consumer market and other market segments".

3. How could this affect investors?

Investors have already felt a positive impact from Peltz's stake in Aurora as the marijuana stock rose sharply after the announcement. An analyst, Martin Landry of GMP Securities, has raised his Aurora course goal by 170% by over 170% as he thinks Aurora will now have a much greater chance of forging strategic partnerships with the help desk. from Peltz.

If Peltz actually helps Aurora Cannabis set up a partnership in the agreement between Canopy Growth and Constellation, the stock should still skyrocket. A major partner could encourage Aurora to partner with Canopy to become the leading player in the global cannabis industry.

Peltz has a strong financial motivation to help the company succeed. Aurora grants him options to buy nearly 20 million shares at a price well below the current price. These options vest quarterly over the next four years. However, if certain milestones are achieved, such as "completion of certain defined transactions" and Aurora shares traded at much higher levels for a specified number of days, the vesting of these options may be accelerated.

You can probably expect the new billionaire from the Aurora team to get to work quickly.

Keith Speights has no position in the mentioned actions. The Motley Fool is a short action by Procter & Gamble. Motley Fool recommends Constellation Brands. Motley Fool has a disclosure policy.