Shares of Auxly Cannabis Group Inc. (TSE:XLY) gained 3.2% to C$2.60 in trading on the Toronto Stock Exchange Tuesday, following the implementation of a 14-for-1 reverse stock split. The consolidation reduced the company's outstanding share count from approximately 1.419 billion to an estimated 101.3 million, giving the cannabis producer an implied equity valuation of roughly C$263 million.
The stock traded within a range of C$2.50 to C$2.70 during the session, with about 47,600 shares changing hands by 12:41 p.m. EDT, representing approximately 0.05% of the post-split float. The modest volume suggests the market is still adjusting to the new share structure.
Valuation and Financial Performance
Based on the split-adjusted share price and share count, the company's market capitalization is estimated at C$263 million. However, some data providers, including Google Finance, displayed a market cap of C$3.70 billion with 102.26 million shares outstanding, indicating a potential delay in updating for the reverse split.
A more meaningful valuation metric is based on the company's operating performance. Auxly reported first-quarter revenue of C$39.8 million, up 22% year-over-year, while adjusted EBITDA grew 65% to C$12.3 million, representing a 31% margin. Operating cash flow, excluding working capital changes, stood at C$11.3 million.
Annualizing the first-quarter adjusted EBITDA of C$12.3 million yields approximately C$49 million. Using the estimated enterprise value of C$266 million (including cash of C$42.7 million and debt of C$45.0 million as of March 31), the initial multiple is around 5.4 times annualized adjusted EBITDA. This projection assumes first-quarter results are sustained and does not represent company guidance.
Peer Comparison
Auxly's financial metrics compare favorably to its peers. Among the most directly comparable companies—Decibel Cannabis Company Inc. (CVE:DB) and Organigram Global Inc. (NASDAQ:OGI)—Auxly posted the highest EBITDA margin at 30.8%, versus Decibel's 23.2% and Organigram's 1.5%. Decibel led in revenue growth at 41%, while Organigram reported the highest overall revenue at C$59.8 million (down 9% year-over-year).
Definitions of adjusted EBITDA and gross margin vary among companies. Auxly tracks finished cannabis inventory that has been sold, Decibel omits fair-value adjustments, and Organigram provides adjusted gross margin.
Management Commentary and Risks
Chief Executive Hugo Alves stated the consolidation is “not a precursor to a financing or any other dilution,” emphasizing that Auxly is “buyers of our shares, not issuers.” The company's current buyback authorization remains valid until April 2027.
Key risks include pressure on vape pricing that could hamper revenue expansion, ongoing fluctuations in biological value adjustments, and planned growth capital expenditures of C$10 million to C$12 million in 2026, which may lower free cash flow even as operating cash generation improves.
The reverse split alters the unit of trading, and stock performance now depends on earnings execution. Larger trading volumes would provide more convincing evidence that the higher nominal price has broadened investor participation.
