FP says Canopy, Aurora sitting on lots of inventory
Canopy Growth Corp (C:WEED)
Shares Issued 348,327,846
Last Close 11/11/2019 $26.85
Tuesday November 12 2019 - In the News
Also Aurora Cannabis Inc (C:ACB) In the News
The Financial Post reports in its Tuesday edition that pot companies are required to place a "fair value" on plants, or "biological assets" at various stages of growth. The Post's Vanmala Subramaniam writes that when a plant is ready for harvest, that fair value price is used as a cost base for figuring the amount of inventory the company holds. For instance if the fair value of a single plant was pegged at $5 at the point of harvest, that plant will be booked as inventory at a price of $5, even though it might not sell for that price. Valuing biological assets in the cannabis industry has long been a source of confusion and controversy among industry observers and investors because of how new the cannabis sector is, and subsequently how hard it is to predict future prices. Some major licensed producers, such as Canopy Growth and Aurora Cannabis -- both of which are set to report this week -- are sitting on tens of thousands of kilograms of unsold inventory, meaning changes to pricing models could have a substantial effect on their bottom lines. Understanding a pot company's balance sheet is a complicated exercise, given how quickly the plants grow and how mould or mildew could ruin an entire crop altogether.
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