John Fabbricatore enforced federal immigration laws in his position as an ICE field office director until two years ago, and now he hopes to help secure America’s borders as a congressman.

The Republican candidate in Colorado’s 6th Congressional District is drawing on his career with U.S. Immigration and Customs Enforcement as he runs against U.S. Rep. Jason Crow in the Nov. 5 election. Crow, a Democrat, just finished his third term in Congress as the representative of the district, which includes Aurora, Littleton, Englewood, Greenwood Village and Centennial.

The odds weigh heavily in Crow’s favor. The nonpartisan Cook Political Report doesn’t consider the fight for the 6th District to be competitive. It’s ranked as solidly Democratic, in part because Crow, 45, won all three of his elections by double-digit percentages and redistricting in 2020 resulted in boundaries more favorable to Democrats.

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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.

How will German legalization of cannabis affect Canadian licensed producer Aurora?

Aurora Cannabis claims it is the second-largest medical cannabis producer in Germany. With the Germans posed to legalize by the end of the year, many expected big wins for the LP.

However, German news was less than optimal. With German officials bowing to European Union pressure, the first wave of German legalization will be low-scale, nonprofit social cannabis clubs.

Meaning, whatever traction Aurora hoped to get from Germany’s recreational legalization is now bust.

But where does that leave the large Canadian LP? The cannabis corporation may have the best balance sheet among its Canadian peers, but that’s not saying much.

How Will German Legalization Affect Aurora?

Aurora Cannabis ended 2023 with a net loss of $67.2 million and $310 million in cash. The company has repeatedly screwed over shareholders by raising equity capital and diluting wealth.

The result has been a steady drop in stock prices. In fact, Aurora Cannabis’ current market cap is $385 million. That’s a 99% fall from their all-time highs.

So how will German legalization affect Aurora’s stock price? On the surface, a low-scale German effort appears like bad news. Germany’s population is twice the size of Canada’s. An Aurora presence in Germany could have helped boost revenues.

However, establishing a presence in Germany would have meant investing capital. Which begs the question: what capital? Investors may not stand for another round of dilution.

Meanwhile, Aurora Cannabis focuses on medical cannabis products. Where gross margins are higher than in recreational markets.

Aurora Cannabis’ losses in the last four years have totalled $1.2 billion.

Why Germany?

Ever since an act of Parliament created Canada’s licensed producers, they’ve been eyeing up the German cannabis market.

But why? How does German recreational legalization or its current medical market affect Aurora and the other LPs?

On the surface, it’s pure economics. At one point, Germans were paying up to $18 per gram for medical cannabis, compared to the $8 average in Canada.

Second, as mentioned, Germany has about 46 million more people than Canada. As well, German insurance claims on cannabis are more common than in Canada. This is part of what led to Aurora’s acquisition of Germany’s most prominent cannabis distributor.

What About Germany’s Pilot Project?

Germany will launch a regional pilot programme as part of the two-phase legalization plan. In select cities, the government will assign a commercial company to supply cannabis through dispensaries. This pilot will be a test to assess broader commercial sales within the country.

So how will Germany’s legalization pilot project affect Aurora Cannabis? Will Aurora be the commercial supplier?

The details of this test pilot programme are not yet known. But you can be sure Aurora executives are rubbing their hands at the prospect.

And can you blame them? They’ve spent millions trying to capture the European market.

As mentioned, Aurora’s German investments involved acquiring Europe’s largest medical cannabis distributor, Pedanios GmbH. They’ve also bought over 3,000 pharmacies. 

Aurora has put significant money into the European markets. But given their emphasis on medical cannabis, it doesn’t seem likely they’d supply Germans with recreational cannabis.

However, the “public health” model of cannabis legalization is about selling pharmaceutical-grade cannabis. It could be that the German government, like the Canadian government, is eyeing these medical producers as commercial suppliers of recreational cannabis. 

If that’s true, German legalization may breathe some life into Aurora. German legalization may give the company a second chance it doesn’t deserve.