Aurora Cannabis Inc. (ACB) - Get Report reported a second-quarter loss of C$237.8 million ($178.8 million) on revenue of C$54.2 million after the market closed Monday. Two analysts surveyed by FactSet had expected the company to post revenue of C$51.8 million. The company attributed the revenue surge to its launch in the Canadian consumer market, where it reported sales of C$21.6 million, and international medical markets. The company said it sold 6,999 kg of cannabis in the quarter. Aurora said it accounted for 20% of consumer sales in Canada. Aurora projected it will reach sustained positive EBITDA beginning in its fiscal fourth quarter. Aurora is one of three Canadian Cannabis companies reporting this week Tilray Inc. (TLRY) - Get Report is scheduled to report its fourth-quarter results on Tuesday, while Canopy Growth Corp. (CGC) - Get Report is scheduled to report its third-quarter results on Thursday. See related story here.<doc-sep>Bloomberg (Bloomberg) -- Credit Suisse Group AG executives ignored warnings from colleagues about troubled steel tycoon Sanjeev Gupta as they channeled $1.2 billion of client funds to his businesses, according to people familiar with the matter.Bankers in Credit Suisse’s commodity trade-finance unit blacklisted Gupta’s Liberty Commodities Ltd. in 2016 because they suspected some of its deals weren’t legitimate, the people said. When they learned about two years later that the bank was lending to his companies through a suite of investment funds, which eventually grew to $10 billion, they flagged their worries to leaders in compliance and the division that housed the loans, one of the people said.The disclosure that Credit Suisse may have put clients at risk despite internal concerns over Gupta’s businesses adds a new twist to the debacle stemming from the March implosion of Greensill Capital, the finance firm at the center of the three-way relationship.Investigations, LawsuitsThe U.K. Serious Fraud Office is now investigating Gupta’s group of companies for suspected fraud, including in its financing deals with Greensill, according to a May 14 statement. Credit Suisse has sued to force Gupta’s Liberty Commodities into insolvency and has since shut the funds that made the loans and launched an internal investigation. Investors are staring at losses as the bank confronts embarrassing lawsuits.“We are currently focusing our efforts on recovering our investors’ money,” Will Bowen, a spokesman for Credit Suisse in London, said in an emailed statement, adding that the bank’s internal probe will focus on “all of the issues” linked to the funds. “We are committed to learning the lessons and will share the relevant lessons learnt at the appropriate time.”Andrew Mitchell, a spokesman for the Gupta Family Group Alliance, or GFG Alliance, a collective of businesses linked to Gupta including Liberty Commodities, denied any wrongdoing.The Greensill saga represents just one of the two disasters that rocked Credit Suisse in the first half of 2021. Since Greensill began unraveling, the bank has announced a $5.5 billion hit from the blowup at Archegos Capital Management.ApologiesFormer Chairman Urs Rohner apologized to shareholders and his successor, Antonio Horta-Osorio, who arrived at the end of April, has promised a sweeping strategy review.Chief Executive Officer Thomas Gottstein, who was head of the division that oversaw trade finance, wasn’t aware of the internal concerns about Gupta that had prompted the bank to cut him off, according to a person familiar with the matter.Employees at the trade-finance unit, which lends money for the buying and selling of commodities, cut ties with Gupta in 2016 after becoming skeptical toward his Liberty Commodities, the people said. They distrusted the documents the company provided, triggering doubts about its transactions, they said. In one example reported by Bloomberg, the company had presented another bank with what seemed to be duplicate shipping receipts. A spokesman for Gupta has denied any wrongdoing.Banking TiesLiberty Commodities pledged assets to Credit Suisse as security for borrowings in 2013 but by early 2016, all such commitments had been extinguished, indicating that the financing relationship had ceased, U.K. Companies House filings show. And while Gupta’s company listed the Swiss bank as one of its lenders in its 2014 annual report, it didn’t in the following year’s report, which is dated May 2016, according to the filings.Their counterparts at other banks, including Macquarie Group Ltd. and Sberbank PJSC, halted trading with Liberty Commodities around the same time because of similar concerns; Goldman Sachs Group Inc. also stopped in 2016, Bloomberg has reported.Nevertheless, executives at Credit Suisse’s asset-management division -- which creates investment products for clients and charges a fee for overseeing them -- began arranging a suite of funds focused on supply-chain finance in 2017. The entities bought securitized loans packaged by Greensill, a firm created by Australian businessman Lex Greensill. Much of the debts were linked to Gupta’s businesses.WarningsOfficials at the commodity trade-finance unit were concerned when they found out about the funds’ links to Gupta and took their fears to Thomas Grotzer, general counsel for the bank’s Swiss division. They also warned Luc Mathys and Lukas Haas, the bankers who helped oversee the trades at the asset-management unit.Grotzer was promoted last month to interim global head of compliance at Credit Suisse. He didn’t respond to requests for comment. Mathys, head of fixed-income at the asset-management division, and Haas, a portfolio manager, were put on temporary leave in March. Neither responded to requests for comment.The bank pushed ahead with the funds and marketed them to investors as being made up of short-term debt secured on invoices, assets considered so safe that Credit Suisse gave the largest vehicle its lowest rating for risk. Yet part of the loans were linked to mere possible future revenues.Other parts of the bank continued working with Gupta as well. Credit Suisse’s investment bankers were due to lead an initial public offering for Liberty’s U.S. steel arm, which was ultimately pulled, according to a statement from the company. Gupta also announced that the Swiss bank would finance his planned acquisition of Thyssenkrupp AG’s steel unit, which fell apart earlier this year.Credit Suisse has so far recouped about $5.9 billion of the $10 billion in these supply-chain funds, but it remains unclear how much will be returned ultimately to investors. Loans to Gupta’s businesses are among a batch of debts that are the “principal sources of valuation uncertainty,” the bank said earlier this month.Liberty Commodities’s external legal advisors investigated “alleged rumors concerning the paperwork” it used in 2019, according to Mitchell, the spokesman for GFG Alliance. They found no evidence to substantiate the rumors, nor was the company “ever subject to further complaints or proceedings,” he said.“LCL has ongoing banking relationships with separate financial institutions,” Mitchell said, referring to Liberty Commodities. “The trade-finance market has been hugely challenging for all but the very largest commodities traders in recent years. Nevertheless, no financial institution has been left out of pocket as a result of lending money to LCL. On the contrary, they have received substantial commercial returns.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.<doc-sep>After a tough end to 2018, marijuana stocks have produced huge gains to start the new year. Even with a gain of 55% in the first five weeks of 2019, Aurora Cannabis (NYSE:ACB) isn't the top performer in the cannabis market, but many see it as having one of the best opportunities to become the leader of the budding marijuana industry. Aurora Cannabis will release its fiscal second-quarter financial results after the market closes on Monday, Feb. 11, and investors are hoping that the cannabis company will be able to show an impressive run-up in revenue. Yet the company has already weighed in with some preliminary results, and they weren't entirely positive -- casting some doubt on just how well Aurora will do in standing up to the marijuana investing hype. Stats on Aurora Cannabis Metric Current Stat EPS estimate (CA$0.06) Last quarter's EPS CA$0.12 Revenue estimate CA$51.8 million Change from last quarter's revenue 75% Can Aurora keep up its momentum? Investors have high hopes that Aurora Cannabis can keep up its positive momentum from recent periods. In the first quarter of fiscal 2019, Aurora managed to produce sequential revenue growth of 55%, coming in at CA$29.7 million. That number was more than triple what Aurora had in sales during the year-earlier quarter, showing the steep growth trajectory that the cannabis company has been able to produce in a short period. More importantly for many investors, the fact that Aurora was able to show a profit was a good sign for the emerging industry -- although there were numerous ways in which the company was able to produce bottom-line gains that partially hid the extensive costs that it continues to incur in its growth efforts. Yet Aurora Cannabis has already given investors some cause for concern coming into its February report, releasing preliminary numbers for the fiscal second quarter that suggest weaker performance than some had hoped to see. Back in January, Aurora said that revenue would come in between CA$50 million and CA$55 million for the quarter, which was far less than more optimistic shareholders had been looking to see. At the time, consensus forecasts had projections of anywhere from CA$60 million to CA$75 million. The primary problem is a major disconnect between the expectations that investors have for developments in the Canadian recreational cannabis market and the reality of the situation. Despite having had advance notice of the size of the opportunity in Canada, Aurora and other producers weren't able to line up capacity increases quickly enough to be ready for the rollout. At the same time, the market infrastructure for actually making sales of recreational cannabis products wasn't entirely in place, especially in some key provincial markets within Canada. Meanwhile, regulators have been overwhelmed with the number of companies seeking to get into the marijuana business, and issuance of required permits and licenses has slowed to a crawl, holding up key projects for expansion across the industry. Can Aurora be the winner? A big question Aurora Cannabis will have to answer is whether it can come up with a stronger strategy for expansion. Many investors are drawing uncomfortable comparisons between Aurora and Canopy Growth (NASDAQ:CGC), as Canopy has chosen to make organic investments in capacity expansion that have generated considerable excitement within its investor base. In particular, the decision to spend $150 million on a hemp production facility in upstate New York could pave the way for Canopy to gain a foothold in the U.S. market. If legalization efforts go forward across the U.S., then that move could prove prescient for Canopy. In the meantime, Aurora has continued to make acquisitions that raise concerns that it's paying too much for growth. For example, the purchase of privately held Whistler Medical Marijuana could involve payments of as much as CA$175 million, but Whistler has only minimal current production capacity. Despite currently profitable operations and a reputation for premium-quality products, Whistler won't necessarily add to Aurora's long-term growth. The fact that Aurora continues to issue shares as payment for acquisitions has also forced longtime shareholders to suffer from dilution. What Aurora has to do In order to reassure investors that the marijuana company remains on the right trajectory, Aurora Cannabis will have to demonstrate an ability to recognize the downsides of its past strategic moves and come up with alternatives that will work more effectively in the future. If it can pull that off, then Aurora will fully justify the share-price gains it's enjoyed in 2019 and could easily add to them as the cannabis industry grows in the future. Check out the latest earnings call transcripts for companies we cover.<doc-sep>
With Aurora Cannabis Inc. and Canopy Growth Corp. reporting earnings in the coming days, investors should watch closely for losses due to their investments in other weed companies. Recreational cannabis legalization began Oct. 17 in Canada, and despite the federal government’s public statements, in the intervening months, the country is grappling with massive supply shortages, according multiple people running companies or working in the sector. Provinces have blamed the licensed cannabis producers for the lack of available product, yet the weed producers have said that the shortage and weak September-quarter earnings are a result of licensing backlogs and provincial buyers placing small orders. The uncertainty surrounding early returns and supply-chain difficulties have weighed on pot stocks, along with doubts about their outsize valuations. Don’t miss: How marijuana companies will report profit despite not selling pot Since Oct. 17, ETFMG Alternative Harvest ETF US:MJ has dropped 11%, Horizons Marijuana Life Sciences Index ETF CA:HMMJ has fallen 14%. After a more than 600% gain on its stock since going public, Tilray Inc. US:TLRY dropped about 40%, Canopy Growth US:CGC CA:WEED has fallen 9.8%. Unlike many of its rivals, Cronos Group Inc. US:CRON CA:CRON has performed well, nearly doubling after it announced that Altria Group Inc. US:MO had taken a $1.8 billion stake in the company. The downturn could be a problem for Aurora US:ACB , CA:ACB especially, which has said it expects sales of C$50 to C$55 million ($37.6 million to $41.4 million) and reports Monday after the opening bell. While Aurora’s portfolio of pot stocks generated large profit in September-quarter results, it could report massive losses this time around because of the sector’s descent and its specific holdings. For more: Cronos CEO says $1.8 billion from Big Tobacco is just a beginning for cannabis industry Cronos aside, the pot stock drop is going to be a especially serious for Aurora, because one of the company’s largest investments is in Green Organic Dutchman Holdings Ltd. CA:TGOD US:TGODF, which gave up its gains from earlier in the year while losing roughly 40% of its value. In a note published late Thursday, Harvest Moon Cannabis Co. CEO Robert Doxtator wrote that he estimates Aurora’s portfolio losses at C$425 million for the December quarter. But the losses will be “on paper” losses and don’t directly affect Aurora — and others’ — ability to produce and sell pot. Analysts polled by FactSet on average project losses of C$0.6 cents a share on sales of C$51.8 million for Aurora. Note there are only two analysts contributing those estimates, which can make the consensus unreliable. Overall, six analysts cover Aurora with an average target price of C$12.09 a share, which represents a 21% upside from Thursday’s closing price. Four have a buy rating, one rates it a hold and one analyst has a sell rating. Explainomics: Investing in a cannabis company? Make sure to ask these four questions Canopy Growth, the world’s largest pot company by market value, reports Thursday after the close. Canopy’s profits may also suffer from the overall sector decline, since it holds a substantial portfolio of public companies, as does its publicly traded venture-capital arm, Canopy Rivers Inc. CA:RIV US:CNPOF Analysts expect Canopy Growth to report losses of C$0.17 a share on sales of C$84.7 million, according to FactSet. Ten analysts cover the name, nine of which have a buy rating; one rates Canopy a sell. The average price target is C$70.70, which is a 17% upside from Thursday’s closing price. The considerably smaller Supreme Cannabis Co. Inc. CA:FIRE US:SPRWF will report Tuesday before the open. Tilray and Cronos have not announced their earnings dates. Aphria Inc. US:APHA CA:APHA , which is the target of a hostile takeover bid, and Organigram Holdings Inc. US:OGRMF CA:OGI reported results in January.