Boris Jordan Might Be Talking Aurora’s Dispersed Shareholder Structure Into Free-Riding the Deal

By Rolando García, Chief Economic Columnist of Ignite It.

Curaleaf (OTCQX: CURLF) CEO Boris Jordan has spent two weeks explaining what Curaleaf would do with Aurora Cannabis (NASDAQ: ACB). He has told IgniteIt that Aurora’s indoor rooms yield about 80 grams per square foot while some Curaleaf facilities approach 140, and that Aurora’s selling and administrative costs run above half of revenue, compared with 27 to 29 percent in Curaleaf’s European business. He has argued that United States rescheduling will lower the industry’s cost of capital and re-rate American operators, and that Aurora shareholders should take Curaleaf paper to be inside that re-rating when it lands.

All of it is meant to make US$4.00 a share look generous, and it does something else besides. From a shareholder’s side of the table, Jordan’s case is that Aurora’s assets are underproductive rather than bad, which is another way of saying they are worth more than US$4.00 once somebody competent runs them. A holder who accepts that reasoning has been handed a reason to want more than US$4.00. As Grossman and Hart showed in 1980, a bidder who convinces shareholders it will improve a company gives each of them a reason to hold on and let the others sell. The improvement will arrive whether or not any individual helps pay for it.

Let’s call this the strong version of free riding. There is a footnote, though, and it is a large one. Company law answers with squeeze-outs, and Curaleaf’s circular sets out precisely how it would use them, so nobody is going to sit outside this deal and quietly collect Jordan’s synergies.

A weaker version survives the remedy, and it might be at play in the dynamics of this deal. A shareholder does not need a workable plan to free-ride. He needs only to conclude that US$4.00 is too little and then do nothing, which requires no coordination with anybody. Curaleaf, meanwhile, has to gather a specific number of shares.

Bear in mind that most of these dynamics are inevitable in aggressive bids. Every hostile bidder has to argue that the target is worth more under different management, because that argument is what justifies the premium and puts pressure on the board. The tension is built into the format. Look at Aurora’s shareholder structure, though, and you can see why it will bite harder here: the register is unusually dispersed, the bidder needs a great many shares, and Jordan has spent a fortnight raising the price at which Aurora’s owners are willing to part with stock he must buy from them by December 1.

Fifty percent, two-thirds, ninety

Three numbers stand between Curaleaf and Aurora, and they are not the same kind of number.

The first is law, and it is not optional. Canadian rules set a floor that a bidder cannot waive, introduced in 2016 to ensure that a takeover proceeds only where a majority of independent holders support it. Under NI 62-104, the country’s takeover-bid regime, more than half the shares held by independent shareholders must be deposited before Curaleaf may take up a single share. The circular calls this the Statutory Minimum Condition and states plainly that it cannot be waived. It comes to around 32.4 million shares.

The second is Curaleaf’s own choice. The offer carries a Minimum Deposit Condition of at least 66⅔ percent of Aurora’s outstanding shares on a fully diluted basis. Against 69,364,778 shares, that is roughly 46.2 million. Crossing it should give Curaleaf enough votes to force the holders who declined into a second-step transaction at the same price. The circular also says that every condition of the offer except the statutory minimum may be waived.

The third is law again. At ninety percent of the shares subject to the offer, Curaleaf can invoke the compulsory acquisition procedure under British Columbia law and buy out the remainder. The process is not quite automatic. Notices go out, dissenting holders have rights, and a court can set a different fair value.

The middle number is where this contest will be decided. Curaleaf has told the market it wants about 46.2 million of Aurora’s shares, and it has reserved the right to change its mind about that. A bidder stranded between the statutory gate and its own condition controls a listed subsidiary it cannot merge into itself, which is an uncomfortable place to sit when your entire case rests on doubling yields and cutting administrative costs inside the target’s own facilities.

Why Curaleaf owns no Aurora stock

There is an older fix for the free-rider problem than the squeeze-out, and Curaleaf arrived without it. A bidder that quietly buys a stake before going public, a toehold in the jargon, solves much of the difficulty, because that block reprices upward the instant the offer becomes known and the buyer profits on its own shares while paying full value for everyone else’s.

Curaleaf’s circular states that it owns no Aurora shares, that none of its directors or officers own any, and that nobody acting with it traded a single share in the six months before the bid.

For its part, Aurora has rules that made a large position difficult. Canadian early warning requirements oblige any holder crossing ten percent of a class to announce it publicly within two business days, which would have pushed the price up while Curaleaf was still buying. Aurora’s shareholder rights plan, in force since October 2018 and renewed in August 2024, treats anyone reaching twenty percent as an Acquiring Person and dilutes them heavily. Between those two lines, a bidder can still accumulate quietly up to about ten percent, so the empty hands were as much a decision as a constraint.

The pill is doing something narrower than its reputation suggests. Rights plans carve out an exempt category called a Permitted Bid, defined by terms that track the statutory regime, and Curaleaf built its offer to fit inside the carve-out. The pill will not fire. What it did accomplish was to foreclose the large stealth position that would have eased Curaleaf’s coordination problem before it began.

One route stays open. Section 2.2(3) of NI 62-104 lets a bidder buy up to five percent of the class in the market during the bid, and Curaleaf’s circular warns shareholders that such purchases may occur. Those shares count toward the 66⅔ percent condition, though not toward the statutory minimum.

All of which raises a question worth its own column. Is there another company that carries none of these restraints and still delivers Jordan the scale he is after? Why Aurora in particular?

Who actually owns Aurora

Institutional holdings sat in the single digits before August, somewhere between four and eleven percent depending on which data provider you consult and which listing you look at, with no single holder above about two percent. Individuals held nearly all the rest.

The annual meeting on August 7 drew holders of 16,639,306 shares in person or by proxy, or 26.86 percent of the shares outstanding on the record date. The 2022 meeting managed 30.93 percent. Management was soliciting proxies on both occasions and had a recommendation attached. To reach the number Curaleaf has set for itself, it needs roughly 2.8 times that participation, and it needs each holder to instruct a broker rather than return a card.

Meeting turnout is a rough guide to how many shares will actually be deposited, and I would not lean on it too hard. Accepting a premium is a livelier decision than approving auditors, and this one arrives with saturation coverage and two solicitation firms telephoning shareholders. The ownership numbers also describe a register that started changing on August 11. Over 105 days, stock moves from holders who are not paying attention toward funds that buy for the specific purpose of depositing, and those funds solve privately what the law solves through squeeze-outs. Anyone crossing ten percent has to file on SEDAR+ within two business days, and a United States holder crossing five percent files a 13D or 13G, so part of that migration is visible while it happens.

What happens to target executives

Aurora’s board will publish a Directors’ Circular within fifteen days of the August 18 commencement, and with a register like this one it carries unusual weight. Holders who will not model the transaction themselves read the recommendation and follow it. What its authors have riding on the outcome is therefore worth knowing.

James Walsh tracked the top management teams of acquired companies over five years and found turnover running at roughly twice the rate of a control group: about a quarter gone inside twelve months, and only some forty percent still in place at the five-year mark. Jeffrey Krug later measured departures at three times the normal rate, with around thirty percent of target executives remaining after five years. Walsh also found that the most senior and most visible people leave earliest. Reading that across to the executives who will sign Aurora’s circular is my inference rather than his finding, though it is not a strained one.

Set Curaleaf’s synergy case beside that. The largest component Jordan has named publicly is the distance between Aurora’s selling and administrative costs, above half of revenue, and Curaleaf’s European operation at 27 to 29 percent. He has said the savings do not come chiefly from headcount, and I see no reason to doubt him. A twenty-point move in that ratio nonetheless implies substantial change to how Aurora’s corporate apparatus operates, whatever the source of the savings.

Curaleaf has therefore published a plan whose economics require reorganising much of the administrative apparatus of the company whose executives must now advise shareholders how to respond. Canadian practice handles that conflict through a special committee, and Aurora has appointed one, with independent counsel and its own financial adviser.

Some of the conduct so far fits the pattern. Curaleaf says Aurora refused a mutual non-disclosure agreement and a site visit, and Aurora disputes how its engagement has been characterised without disputing much of the substance. On August 19, the day after the bid formally commenced, Aurora completed two United Kingdom acquisitions, the importer Internode Pharma and the pharmacy HAP Pharma, for £2.1 million in cash. Material acquisitions appear on the list of defensive tactics Curaleaf had published a week earlier. That sum is far too small to obstruct anything, which is worth saying plainly, but the timing still asks a question the circular ought to answer. Aurora followed on August 24 with earnings guidance for fiscal 2027, which is the sort of thing a board publishes when it intends to argue that shareholders are better off alone.

Size and votes

Curaleaf’s shares were worth somewhere near US$2.8 billion in mid-August, while its registration statement values Aurora at US$274.7 million fully diluted. One company is roughly ten times the size of the other, which is why the bid runs in this direction and could not run in the other.

The gap also shapes how the contest ends. Issuing 24,021,022 subordinate voting shares, the maximum contemplated, is modest against the 233,543,560 already outstanding. This is a bolt-on for the buyer and an existential question for the seller, and a buyer of that relative size has more financial room to improve its offer than the numbers first suggest.

Voting rights are a separate matter. Curaleaf’s circular gives the position as of August 17: 233,543,560 subordinate voting shares carrying 33.2 percent of aggregate voting rights, and 31,323,568 multiple voting shares carrying 66.8 percent. Company filings show Jordan holds all of the second class, and his subordinate holdings take him past 69 percent of the total vote. Aurora has one class of shares, one vote each, and almost nothing held by insiders.

So Aurora’s shareholders are being asked to leave a company anyone could buy and join one nobody can, taking the junior class of stock as payment, capped at US$5.00 a share. Reaching that ceiling would require Curaleaf’s twenty-day average to hit roughly US$12.27, which is 31 percent above where it closed on August 27. The cap matters for anyone who finds Jordan’s rescheduling forecast convincing, since it limits how much of the forecast this offer can deliver, though it is nowhere near binding today.

Four things to expect

The market’s opening read went against most of the above. Curaleaf’s own filing puts Aurora at US$3.96 on Nasdaq on August 11, and Curaleaf closed that day at US$9.87, which valued the offer at about US$4.17. Aurora sat 5.3 percent below the consideration, which is the discount professionals attach to a deal they expect to complete.

Sixteen days later, the discount has become a premium. Curaleaf closed at US$9.36 on August 27, down 5.2 percent since the announcement, and because the exchange ratio is fixed at 0.3463 shares, the consideration fell with it, to US$3.99. Aurora closed the same session at US$4.01. The target now trades slightly above what the bidder is offering to pay.

Nobody amended a term to produce that. Curaleaf struck the offer off its own close of US$9.38 on August 10, so the headline of US$4.00 has simply round-tripped, and Aurora shareholders have watched a fortnight of argument leave them with a marginally worse offer. Some of the premium is ordinary, since most of the consideration is Curaleaf stock and an accepting holder owns the recovery if Curaleaf rallies. But a move from a 5.3 percent discount to a small premium in sixteen sessions is a change in what the market expects. A merger spread at or below zero in a contested bid looks like a market betting the terms improve.

Four predictions, all of which can be checked before the year ends.

Curaleaf clears the statutory fifty percent, and it gets there because arbitrage funds accumulate stock rather than because individual holders grow enthusiastic. Early warning filings are one useful signal, though not a complete one, since a dozen funds holding three or four percent each would transform the register without anybody having to file at all.

The 66⅔ percent condition is a stretch by December 1. It would require a shareholder base that has never turned out anywhere near that level to override a board telling it to refuse, in exchange for capped paper in a controlled company.

Curaleaf therefore waives its own Minimum Deposit Condition, raises the price, or extends. The waiver is the outcome nobody is discussing, and the circular expressly permits it, which would leave Curaleaf holding control of a company it cannot yet integrate. A bidder that waived due diligence, waived financing conditions, published warnings about defensive tactics before it had even commenced, and spoke about closing in January has shown how badly it wants the asset. The market has already moved toward this view.

Aurora’s circular goes after the currency ahead of the headline price. The junior share class, the absent floor, the US$5.00 ceiling and Jordan’s control of the vote are the strongest cards the board holds, and it has played none of them publicly.

The count of shares sitting in the depositary on December 1 will settle this, and that count is hard to predict because Boris Jordan has spent two weeks explaining, persuasively, that Aurora is worth more than he is offering to pay for it.

A note from the editor: The statutory fifty percent figure is calculated on the outstanding share count implied by the circular’s cash consideration estimate. The 66⅔ percent figure uses the fully diluted count of 69,364,778 that the circular itself specifies. The 66.8 percent voting weight of Curaleaf’s multiple voting shares is disclosed in the circular; Jordan’s aggregate share of the vote is derived from his individual holdings across both classes. Curaleaf’s market value is an estimate based on shares outstanding in both classes at the August closing price rather than a figure taken from a filing. The company completed a three-for-one consolidation of both classes in June 2026, so historical price and share-count comparisons require adjustment.