Aphria Inc (NYSE: APHA) is halted in the pre-market this morning after tremendous declines were seen on the stock yesterday and early on this morning. The declines came after a short-side report was published on the stock, calling it a shell game. Today, we’ll talk about:
- The report and halt;
- what we’re seeing from APHA stock as a result; and
- what we’ll be watching for ahead.
- APHA has responded in a press release. The update is below.
APHA Halted After Short Report Sends Shares Tumbling
As mentioned above, Aphria is halted in the pre-market hours this morning. The halt is a “T1” halt, simply meaning that news is pending. Nonetheless, the halt comes after a short report was published on Seeking Alpha by Quintessential Capital.
In the report, Gabriel Grego, founder of Quitessential Capital, said that his call has nothing to do with the overall outlook for the cannabis sector or other cannabis stocks. In the report about APHA, Grego said that the company has been on a buying spree over the past year. However, some of the companies acquired have little to no value and bad fundamentals.
The report also accused the company of hiding the fact that insiders have been involved with some of the companies that APHA has acquired. In a statement to Yahoo! Finance, Grego had the following to offer:
We believe there’s something sinister happening in this company… These acquisitions get made from shell companies that are theoretically at arm’s length, but we can see very clearly there was the presence of some of the company’s insiders.
Moreover, the report points to the idea that the company is producing low-quality cannabis and using dilutive share offerings to finance questionable acquisitions. In the article, one of the claims is that the registered headquarters of one of the company’s large Jamaican acquisitions is actually an abandoned building. Moreover, a worker at the company’s Argentinian acquisition said that revenue in 2017 was only $430,000, a far cry from the $11 million that the company reported.
Update – APHA Responds
In a press release issued minutes ago, Aphria responded to the short report, stating that it stands behind its LATAM acquisition. In the release, the company said that the acquisition consists of licenses and other assets and related businesses in Colombia, Argentina and Jamaica and a right of first offer and refusal in respect of Brazil. In a statement, Vic Neufeld, CEO at APHA, had the following to offer:
Since closing this important strategic acquisition in September, we have made considerable progress supporting and building out our operations on the ground in Latin America and the Caribbean. We have nearly 100 employees across the region dedicated to advancing the Company’s business interests, including cultivation, processing, research and development, partnerships and continued expansion. International operations are a core component to our proven growth strategy and we are working to integrate and enhance operations and product channels throughout Latin America to position them for sustainable, long-term shareholder value creation.
What We’re Seeing From The Stock
While the stock is halted at the moment as the NASDAQ waits for news to be released, before the halt, the stock was in free fall. Aphria fell a dramatic 23.42% by the closing bell yesterday. Before the halt, the declines continued and our partners at Trade Ideas alerted us to the movement. At the time of the halt, (8:06), APHA was trading at $5.38 per share after a loss of $0.67 per share or 11.05% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the iWatch Markets team will continue to keep a close eye on APHA. In particular, we’re interested in following the story surrounding the halt and the pending news that should be released relatively soon. We’re expecting that the pending news is a response to the Seeking Alpha article, but there really is no telling what the company has in store. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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