Increasingly, there seem to be only two outcomes left for Aurora Cannabis (NYSE:ACB). The company needs to find a buyer — or Aurora stock is headed to zero.

That might sound overwrought. It is, to some extent. There still is a chance that Aurora can muddle through on its own. In that scenario, cost cuts keep the company from tripping the covenants on its debt, while demand for “Cannabis 2.0” products finally drives consistent revenue growth.

That’s an awfully narrow path, however, and one with little room for error on either front. It increasingly looks like Aurora Cannabis needs a significant chunk of cash, and quickly.

In other words, Aurora, and Aurora stock, need a white knight.

The Balance Sheet Problem

Aurora has significant balance sheet concerns highlighted by last month’s second-quarter report.

The most obvious red flag is in the amendment of the covenants surrounding the company’s debt. Under that agreement, Aurora originally had to reach specified EBITDA (earnings before interest, taxes, depreciation and amortization) thresholds based on the amount of outstanding debt. The good news is that those covenants have been removed.

The bad news is why and how those covenants were removed. Aurora had no chance of reaching those thresholds. And so, lenders backing Aurora’s secured facility changed the requirement to the achievement of any positive EBITDA (adjusted for several factors) starting in the first quarter of fiscal year 2021.

But they also slashed the size of the facility — the amount Aurora Cannabis can borrow. There’s now a minimum liquidity covenant, which requires Aurora to have 35 million CAD on hand.

These moves force Aurora into a corner. To achieve even positive EBITDA by Q1 FY2021 — which ends Sep. 30 of this year — the company has to slash expenses. Selling, general, and administrative expenses are being more than halved, from almost 100 million CAD in Q2 FY2020 to a guided 40 million CAD to 45 million CAD three quarters later.

The deal itself highlights the strain under which Aurora is operating. Healthy companies don’t cut operating expenses by more than 50% in less than a year.

The bond markets, too, show the risk. Aurora’s convertible bonds, which mature in 2024, trade at 53 cents on the dollar. They offer a 24% yield to maturity (the convertible feature of the issue has minimal value. The bonds convert at $7.23 per share, while Aurora stock currently sits near $1.).

Simply put, this is a company in financial trouble. The negotiations with lenders and bond market valuations both prove that fact.

How Aurora Muddles Through

Again, it’s possible at least on paper that with these revised covenants, Aurora can make it through on its own.

Achieving positive EBITDA by Q1 appears difficult. Aurora lost 80 million CAD on that basis in the fiscal second quarter. It can cut that loss by over 50 million CAD through SG&A reductions.

That still leaves the company needing improvement in gross margin and in revenue to turn EBITDA positive. Net revenue in Q2 was just 66.6 million CAD, and Aurora has to add another 25 million CAD-plus in profit in three quarters to get overall EBITDA to breakeven.

That requires a quick ramp in revenue, which seems unlikely. Cannabis 2.0 products like vapes and edibles have sparked optimism, but still-slow regulatory approvals are leading to lower-than-expected sales. Medical cannabis sales in Canada have been pressured by the recreational market, per Aurora’s second quarter earnings call. The European business, as chief financial officer Glen Ibbott noted on that call, has likewise grown slower than expected.

Aurora also has to drive gross margin higher in a market likely to see continued price pressure. Black market producers still are significantly undercutting their regulated rivals on price. Aurora, Canopy Growth (NYSE:CGC), and others are trying to respond by moving to low-price offerings, but those offerings no doubt will have lower margins, too.

What Aurora Stock Needs

Of course, even if Aurora doesn’t hit positive EBITDA by Q1, that doesn’t necessarily mean the company is going to bankruptcy, or that Aurora stock is headed to zero. Lenders can amend the covenants again if Aurora falls short.

They’re probably incentivized to do so, rather than disrupting the company’s business via a restructuring at a critical time. Those lenders know, too, that as Canopy chief executive officer David Klein noted last month, “there’s not a lot of market demand” for cannabis assets at the moment. A “fire sale” is in no one’s interest right now.

Still, as long as that debt hovers over Aurora, ACB stock is going to struggle to bottom, let alone rally. As I wrote last month, it will take a significant acceleration in revenue growth. And given overproduction and black-market sales, I’m skeptical that’s coming. In the meantime, to raise Aurora will keep selling stock into any rally using its “at the market” facility, keeping a lid on the share price.

So how can Aurora fix that debt? It needs a white knight. It needs a major company to do for it what Constellation Brands (NYSE:STZ,NYSE:STZ.B) did for Canopy, and what Altria (NYSE:MO) did for Cronos (NASDAQ:CRON).

The sale of a sizeable stake of a company with a market capitalization still around $1 billion could minimize, if not quite outright fix, Aurora’s balance sheet problem. A suitor might see the company’s reach as still valuable, and its empty CEO chair as a place to install better oversight.

ACB Remains an Avoid

Is that white knight coming? I’m skeptical. Here, too, the debt is an issue.

A company buying a stake in Aurora, or the whole company, is taking on future losses. It’s also making bondholders whole. The fact that the debt trades at 53 cents on the dollar shows there’s a real risk of bankruptcy. A long-term-minded firm could look at Aurora and argue, logically, that there’s a reasonable chance of acquiring its assets and brands at a far cheaper price should the company enter a restructuring.

But a more aggressive player also could argue that the value of the stake would rise instantly once the purchase was announced. It’s likely Aurora stock would see a huge spike if investor confidence toward its balance sheet improved.

Obviously, shares of Cronos and Canopy have struggled as well, but bankruptcy risk for those firms remains minimal. And so, it’s no surprise that those stocks have outperformed ACB notably over the past six months, declining by about half against an 83% drawdown for Aurora stock.

I’m loath to bet on a stock in a hope that an acquirer of some sort will arrive. And I’m skeptical that a major investor necessarily would choose Aurora; there is no shortage of other companies to own, and many licensed producers will go bankrupt in the next 12 to 24 months.

But a white knight could show a way out for Aurora Cannabis. What worries me is that it might be the only way out.

Vince Martin has covered the financial industry for close to a decade for InvestorPlace.com and other outlets. He has no positions in any securities mentioned.