Aphria Archives - Green Market Report

Debra BorchardtDebra BorchardtOctober 15, 2019
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7min2050

Aphria Inc. (TSX: APHA)(NYSE: APHA) stock jumped over 16% to trade at approximately $5.10 in early trading after the company reported that its revenue increased 849% to $126.1 million for the first quarter ending August 31, 2019, however sales declined 2% from the previous quarter. Adult-use cannabis accounted for $20 million in revenue for the first quarter, an 8% sequential increase.

The company delivered net income of $16.4 million in the first quarter. It also stated that it ended the quarter with a strong balance sheet and liquidity, including $464.3 million of cash, cash equivalents, and liquid marketable securities, to fund planned Canadian and International growth.

“We are pleased to report a second consecutive quarter of profitable growth with a strong contribution from our Canadian cannabis operations. Our success was also driven by our international business and the strength and growth of our brands, particularly Broken Coast, despite a small fire at our British Columbia facility at the end of the quarter. This solid start to the year keeps us on track to achieve our fiscal year 2020 financial outlook,” stated Irwin D. Simon. “Going forward, we remain focused on our highest-return priorities both in Canada and internationally as our team furthers the development of our medical and adult-use cannabis brands to drive growth through innovation and return value to shareholders.”

The good news from Aphria lifted the sector, which has been in a bear market for months. Several big names like Canopy Growth (CGC), Tilray (TLRY) and Aurora Cannabis (ACB) were moving higher in early trading by 2-3%. Aphria was also stung by news last week that Aleafia would no longer buy its cannabis saying the company couldn’t meet its supply agreements. So, this was a welcome relief for shareholders.

Revenue Mix

The sequential drop in revenue was attributed to “a decrease in distribution revenue from $99.2 million to $95.3 million associated with a change in business strategy at CC Pharma to maximize profitability after recent changes in the German government’s medical reimbursement model. The decrease in distribution revenue was partially offset by an increase in net cannabis revenue of $30.8 million from $28.6 million.” Aphria said it sold over 3,317-kilogram equivalents in the adult-use market and 1,354-kilogram equivalents for medical cannabis sales. The company also stated that the estimates for the impact on revenue from the small fire at Broken Coast would be approximately $1.5 million in the quarter; however, the majority of the lost quarterly revenue would be reported in the company’s second quarter.

The average retail selling price of medical cannabis fell to $7.56 per gram in the quarter versus $7.66 in the prior quarter, primarily related to a higher percentage of total medical sales coming from Aphria. The average selling price of adult-use cannabis, before excise tax, increased to $6.02 per gram in the quarter, compared to $5.73 per gram in the prior quarter.

Looking Ahead

Aphria is reaffirmed its guidance for fiscal year 2020 with net revenue of approximately $650 million to $700 million, with distribution revenue representing slightly more than half of the total net revenue. The company also forecasted adjusted EBITDA of approximately $88 million to $95 million.


StaffStaffOctober 8, 2019
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7min1910

It’s time for your Daily Hit of cannabis financial news for October 8, 2019.

On The Site

MedMen

MedMen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF) and PharmaCann, LLC made a big deal back in December of 2018 that MedMen would buy PharmaCann in an all-stock transaction. That deal, once valued at $684 million, is now off. MedMen is now saying that it will focus on leveraging its retail brand, its leadership position in California and its digital platform to grow the business will create greater shareholder value than the completion of the transaction.

The company also took this moment to announce that Zeeshan Hyder has been appointed Chief Financial Officer at MedMen. Mr. Hyder, currently MedMen’s Chief Corporate Development Officer, has been an integral part of the leadership team at MedMen since 2017, overseeing corporate development, investor relations and other financial growth initiatives. To date, Mr. Hyder has led over $300M in M&A deals executed, partnered with the CEO to take the company public and raised $500M in capital for direct investment into the business.

Hyder succeeds Michael Kramer, who apparently was terminated as of October 7, 2019. Kramer was only just hired in December of 2018 and he followed the previous CFO James Parker who only lasted a year and half and is currently suing Medmen for breach of contract.

Aleafia Health

Aleafia Health Inc. (TSX: ALEF)(OTC: ALEAF) has terminated its deal to buy cannabis from Aphria Inc. (TSX: APHA)(NYSE: APHA) saying Aphria failed to meet its supply obligations. The deal that was agreed to on September 11, 2018 said that Aphria would provide up to 175,000 kg equivalents of cannabis products over an initial five-year term, commencing May 1, 2019. Aleafia said the termination should not affect the company. A few weeks ago, Aleafia told the market on Tuesday that it will achieve positive net income for the quarter ending September 30, 2019. The company also stated that it had $51 million in cash on hand.

Aphria released a statement saying, “We are disappointed that Aleafia has chosen to terminate its Agreement with Aphria Inc. The Company had every intention of fulfilling its obligations under the Agreement. As a large shareholder of Aleafia, Aphria made good faith efforts to ensure the continuation of the Agreement understanding it was in the best interest of all parties involved. However, the termination of this legacy Agreement frees up significant supply allowing the Company to service its brands that are in high-demand across the country.”

In Other News

Target Group Inc (OTCQB: CBDY) announced that its wholly-owned subsidiary, Canary RX Inc (“Canary”), has been granted licenses to cultivate, process and sell cannabis pursuant to the Cannabis Act (Bill C-45). Strategically located just outside of Toronto, ON, Canary RX will begin cultivating cannabis in its 44,000 square foot facility, producing 3600 kilograms annually.

The Supreme Cannabis Company, Inc.  (TSX: FIRE) (OTCQX: SPRWF) announced that Blissco Cannabis Corp., Supreme Cannabis’ premium wellness brand and a multi-licensed processor and distributor, has received licensing approval from Health Canada for the sale of cannabis oils from its facility in Langley, British Columbia.

 

 


Debra BorchardtDebra BorchardtOctober 8, 2019
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3min3550

Aleafia Health Inc. (TSX: ALEF)(OTC: ALEAF) has terminated its deal to buy cannabis from Aphria Inc. (TSX: APHA)(NYSE: APHA) saying Aphria failed to meet its supply obligations. The deal that was agreed to on September 11, 2018 said that Aphria would provide up to 175,000 kg equivalents of cannabis products over an initial five-year term, commencing May 1, 2019.

“Following Aphria’s failure to meet its supply obligations under the Supply Agreement, Emblem has exercised its contractual right to terminate the Supply Agreement in accordance with its terms. The termination of the Supply Agreement by Emblem was made without prejudice to its rights accrued to the date of termination (including its rights to be refunded the unused balance of its deposit) and its rights to seek damages as a result of Aphria’s default and termination thereunder.”

Aleafia said the termination should not affect the company. A few weeks ago, Aleafia told the market on Tuesday that it will achieve positive net income for the quarter ending September 30, 2019. The company also stated that it had $51 million in cash on hand.

With regards to production, the company also stated a few weeks ago that harvesting is expected to begin in two weeks at the Port Perry facility, whose expansion phase is expected to be finished this November. The Niagara Greenhouse Phase I remains in a grow-ready state pending receipt of a Health Canada Cultivation Licence. Remaining retrofitting is limited to two final growing rooms in the facility’s Phase II portion, which are expected to be completed in October 2019. All other non-cultivation infrastructures including trimming & drying room, shipping, and disposal areas are entirely complete.

Aphria Comments

Aphria released a statement saying, “We are disappointed that Aleafia has chosen to terminate its Agreement with Aphria Inc. The Company had every intention of fulfilling its obligations under the Agreement. As a large shareholder of Aleafia, Aphria made good faith efforts to ensure continuation of the Agreement understanding it was in the best interest of all parties involved. However, the termination of this legacy Agreement frees up significant supply allowing the Company to service its brands that are in high-demand across the country.”

Aphria stock is falling over 5% to $5.11, while Aleafia is down over 2% to 63 cents.


Debra BorchardtDebra BorchardtAugust 5, 2019
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4min5580

Canadian cannabis company Aphria Inc. (NYSE: APHA) saw its stock jump over 40% in trading on Friday after the company delivered profits that pleased traders and gave a rosy outlook for 2020. The company reported net income of C$15.8 million or $11.9 million versus last year’s loss of C$5 million for the same time period. Sales jumped to C$128 million over the previous year’s C$12 million.

The move helped polish what was starting to be another dismal quarter for cannabis stocks. Most cannabis indices got a sympathetic lift on the rise in Aphria stock on Friday. The second quarter saw most cannabis indices down by 15-20%. The third quarter also started with continued selling, but this may have put the brakes on some sell tickets.

“It’s a new day at Aphria. Our team’s solid execution across key areas of our business resulted in strong adult-use revenue growth and a profitable fourth quarter,” stated CEO Irwin D. Simon. “Over the last six months, our organization identified immediate priorities to help generate substantial progress near-term and long-term.”

The company stated that the higher revenue in the quarter was driven by $99.2 million of distribution revenue from CC Pharma and other distribution companies and $33.5 million of revenue from cannabis produced. Net revenue includes over 3,228-kilogram equivalents sold for the adult-use market and 1,417-kilogram equivalents for medical cannabis sales.

It is worth mentioning that the company received $50 million cash from the failed Green Growth Brands takeover attempt and that it will get another $39 million in November. The company also ended the quarter with a strong balance sheet including $571 million of cash, cash equivalents and liquid marketable securities, which Aphria said it plans on using to fund Canadian and International growth.

While some on Twitter pointed to an unrealized gain on convertible debentures creating a non-operating income of $40 million, that pales in comparison to the revenue from CC Pharma, which was acquired in 2018. CC Pharma is a leading distributor of pharmaceutical products to pharmacies in Germany as well as throughout Europe. European sales were double North American sales for the company.

Looking Forward

Aphria said it is forecasting fiscal 2020 revenue net of excise taxes to be C$650 million to C$700 million. The company has also projected an adjusted EBITDA of approximately $88 million to $95 million. Jefferies analyst Ryan Tomkins rates the company as a Buy and wrote, “In the context of poor sector sentiment, profitability becoming an increasing focus, and guidance scarce, this print is very reassuring and supports our conviction in the name.”

The company is also said to be considering buying some of the assets of CannTrust (NYSE: CTST) as the company is currently in a death spiral following reports of illegal growing.  Bloomberg News reported that Irwin said his company was eyeing parts of the company.


William SumnerWilliam SumnerAugust 1, 2019
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5min4090

It’s time for your Daily Hit of cannabis financial news for August 1, 2019.

On the Site

Executive Spotlight: Jamie Warm, CEO and Co-Founder of Henry’s Original

Jamie Warm is the CEO and Co-Founder of Henry’s Original. Despite the young age of the legal industry, Jamie has only had one career: growing cannabis. At Henry’s Original,  his responsibilities include setting the overall strategic vision of the company, driving retail penetration and nurturing the financial health of the company.

Tribune Publishing Enters Agreement With The Fresh Toast For Cannabis News

The medical and recreational marijuana industry just received a major boost with consumers.   Like Walmart, Kroger, CVS, Amazon, and other retailers embrace CBD, now mainstream media is working to give consumers the knowledge on how to use and where to shop.   Tribune Publishing Co. (NASDAQ: TPCO), the owner of the Chicago Tribune, NY Daily News, Orlando Sentinel, South Florida’s Sun-Sentinel, Hartford Courant and more along with syndicating content to over 500 United States newspapers, has entered a partnership with The Fresh Toast, one of the largest cannabis media companies in the industry.

Nielsen Predicts Legal Cannabis Sales In The U.S. To Reach $41 Billion By 2025

Cannabis was featured in Nielsen Company’s Total Consumer Report 2019, with the data and information company predicting the sales of cannabis consumer packaged goods to rise 5x that 2018’s sales. They forecast that the sales of all legalized cannabis products in the U.S. could reach $41 billion by 2025.

In Other News

Aphria

Today, Aphria Inc. (TSX: APHA) (NYSE: APHA) announced their financial results for the fourth quarter, ending on May 31, 2019. Net revenue was C$128.6 million, up 75% from the previous quarter. Revenue from adult-use cannabis was C$18.5 million. Adjusted EBITDA from cannabis operations was C$1.9 million. The net loss was C$15.76 million.  “It’s a new day at Aphria. Our team’s solid execution across key areas of our business resulted in strong adult-use revenue growth and a profitable fourth quarter,” stated Irwin D. Simon. “Over the last six months, our organization identified immediate priorities to help generate substantial progress near-term and long-term.”

Harvest Health & Recreation

Harvest Health & Recreation, Inc. (CSE: HARV) (OTCQX: HRVSF) today preannounced its unaudited revenue for the second quarter. Revenue is estimated to be between $26-$27 million, and between $75-$77 million when counting pending acquisitions of Falcon, Verano, CannaPharmacy and Devine Holdings and the closed acquisitions of Leaf Life and Urban Greenhouse. The company will release its full financial results on August 15, 2019.

Cadiz Inc.

Cadiz Inc. (NASDAQ: CDZI) announced that it has entered a joint venture partnership with Glass House Farms, which is a division of California Cannabis Enterprises. Operating under the name SoCal Hemp Co., up to 9,600 acres of hemp will be cultivated at Cadiz Ranch in San Bernardino County, California. “The sun-drenched, isolated natural environment at the Cadiz Ranch is ideal for the commercial production of organically sun-grown hemp and natural hemp-derived products, including CBD, which are presently driving market growth,” said Glass House Farms President Graham Farrar. “With plants already in the ground at the largest agricultural operation in San Bernardino County, we are working closely with the team at Cadiz to leverage our collective strengths. We look forward to bringing our full operation online and being a long-term, trusted partner and resource to the local community, our customers and clients.”


StaffStaffMay 21, 2019
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7min6140

The owners of APHA stock will know sometime in the next 12-24 months if Irwin Simon’s rise to power at APHA is a good or bad thing

By Will Ashworth, InvestorPlace Contributor May 16, 2019, 9:15 am EDT

No one who follows Aphria Inc. (NYSE:APHA ) stock should have been surprised that the company’s president, Jakob Ripshtein,  resigned on May 14.

Ever since interim CEO Irwin Simon was appointed Independent Chair of Aphria’s board in December,  it was only a matter of time before Simon, the entrepreneurial founder and former CEO of Hain Celestial (NASDAQ:HAIN), would play a more prominent role at the Canadian cannabis company.

Out With the Old

Simon stepped down in June 2018 from his role as CEO of Hain after years of sub-standard shareholder returns and a hard-court press from activist investor Engaged Capital.

Simon owned 1.7% of Hain’s stock, but Engaged has an 11.3% stake, so Engaged’s founder, Glenn Welling, was appointed to Hain’s board in September 2017. Simon remained the chairman of Hain, the same role he now holds at Aphria.

At 60 and in reasonably good health, Simon probably isn’t ready to devote his life to the golf course and retirement.

The resignation of Ripshtein, after Vic Neufeld stepped down as APHA’s CEO in January, is another part of the changing of the guard at Aphria.  

I expect the board to soon remove the interim tag from Simon’s current title. The Irwin Simon era at APHA has begun.

The New COO

Ripshtein joined Aphria in May 2018 as its chief commercial officer and was promoted to president six months later, before Simon arrived on the scene. While Simon’s words of thanks to Ripshteins in the company’s press release were complimentary, it’s clear by Aphria’s choice for COO that Simon wasn’t comfortable working with Ripshtein, a former CFO of Diageo’s (NYSE:DEO) North American operations and former president of the liquor company’s Canadian operations.  

“On behalf of the Board of Directors and Aphria team, we thank Jakob for his contributions to the Company over the past year and wish him well in his future endeavors. He has been instrumental in assembling the incredible team we are fortunate to have today that will carry his responsibilities forward,” Irwin stated in Aphria’s May 14 press release.

The new COO is Jim Meiers, who happens to have come to Aphria after 14 years at Hain Celestial, where he worked alongside Simon. At Hain, Meiers led several senior executive positions, including president of Celestial Seasonings. Before Hain, he worked at both H.J. Heinz and Kraft Foods.

Meiers’ hiring suggests two things.

First, it’s likely Simon wanted someone he could trust to execute Aphria’s game plan and someone who’s familiar with his style of management. Every change at the top involves a little turnover. I’m sure it wasn’t personal.

Secondly, Meiers’ background suggests that Simon is looking to implement a supply chain which is more appropriate for a food company rather than a medical company. Both, however, require significant oversight, making the appointment a sensible one and positive for Aphria stock.

The Bottom Line on Aphria Stock

The moves announced May 14 are simply part of the ongoing transformation of Aphria from Vic Neufeld’s baby to Irwin Simon’s.

One of two things is going to happen in the coming months.

Either Simon will be appointed the permanent CEO (likely) or Meiers will become the chief executive (less likely but still possible). 

Given the spotty performance of Hain stock over the past 15 years, I don’t know if Simon’s rise to power at APHA is, overall, a good thing or a bad thing for the owners of Aphria stock.

At the time of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.


William SumnerWilliam SumnerMay 8, 2019
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7min4110

It’s time for your Daily Hit of cannabis financial news for May 7, 2019.

On the Site

Investors Are Bullish On Cannabis, According to KCSA Survey

Investors are feeling bullish about the cannabis industry, according to a new survey released by KCSA Strategic Communications. Titled the Cannabis Investor Survey, KCSA polled over 250 retail cannabis investors about their investments and outlook on the legal cannabis industry in the United States.

Illinois Releases Plan For Full Legalization

This past Saturday, Illinois Governor J.B. Pritzker released the plan for full cannabis legalization which is set to begin on January 1, 2020. Companies that currently had medical cannabis licenses would get a jump on other companies with regards to applying for licenses. According to the plan, new licenses for dispensaries would begin on May 1 and processors, craft growers and transporters would begin licensing on July 1. It wouldn’t be until late 2021, that the next round of businesses would receive licenses.

Long-awaited German Tenders Handed to Specialist Trio

White smoke emanating from Germany’s medical agency signals the wait is over to find out which firms have been awarded medicinal cannabis tenders for Europe’s top market. Two Canadian firms, Aphria, and Aurora Cannabis and Germany’s Demecan have won out, it has emerged. The three companies will split a four-year tender to grow 10,400kg between them. Aphria won five of the 13 lots, with Aurora Cannabis and Demecan handed five and three lots respectively.

In Other News

MJardin

MJardin Group, Inc. (CSE: MJAR) (OTCQX: MJARF) today released their fourth quarter and full year financial results for 2018. Revenue for the year was $27.5 million. Adjusted net loss from operations was $27.4 million and adjusted EBITDA was $12.2 million. “2018 was a year of significant change in the company as we expanded in to another US state, entered the Canadian market via acquisition, and became a publicly traded company on both the CSE and OTC,” remarked Adrian Montgomery, MJardin Chairman of the Board and Interim CEO. “In addition, we have restructured our corporate size and organization to better integrate and align with our core business goals in both countries.”

Heritage Cannabis

Heritage Cannabis Holdings Corp. (CSE: CANN) announced that it has closed a $17.3 million bought deal offering, selling approximately 32.6 million units of the company at a price of $0.53 per unit. Each unit consisted of one common share and one-half of one common shar purchase warrant. Proceeds from the offering will be used to increase extraction capacity and follow-on investments in existing portfolio companies, new domestic and international opportunities, working capital and general corporate purposes.

TerrAscend

TerrAscend Corp. (CSE: TER) announced that it has completed the book-build for its previously announced upsized private placement. The gross proceeds from the offering totaled $52 million. The company is issuing common shares in the private placement at the previously announced price of C$7.64, which is a 5% discount from Monday’s closing price.

Cronos Group

Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) announced that is has opened a cannabinoid device R&D facility in Israel. Dubbed Cronos Device Labs, the facility will feature a 23-member team and is comprised of product designers, mechanical, electrical and software engineers, and analytical and formulation scientists. “The launch of Cronos Device Labs is an exciting next step on our journey to become a leader in cannabinoid innovation,” said Cronos Group Chairman, President and Chief Executive Officer Mike Gorenstein. “Vapor is already one of the most popular forms of cannabis consumption, and we see a clear opportunity for Cronos Group to introduce the next-generation of vaporizer products designed specifically for cannabinoid formulations.”

Canopy Growth

Canopy Growth Corporation (TSX: WEED) (NYSE: CGC) announced the launch of Spectrum Therapeutics, a new global brand that will encompass all of the company’s ongoing commercial medical and clinical research operations including Spectrum Cannabis, Canopy Health Innovations , and Bionorica SE-founded C3 Cannabinoid Compound Company. Spectrum will be involved with the production and distribution of full-spectrum and single cannabinoid medical cannabis products; education, resources and support for patients and healthcare practitioners; as well as pre-clinical and clinical research and the development of cannabinoid-based medicines.


William SumnerWilliam SumnerApril 24, 2019
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5min4130

It’s time for your Daily Hit of cannabis financial news for April 24, 2019.

On The Site

Cresco Labs

Chicago-based Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF) released its unaudited financial results for the fourth quarter and full year ending December 31, 2018. The fourth quarter revenue was $17.0 million, an increase of 411% over last year for the same time period and up 33% sequentially. The company trimmed its net losses to $2.6 million versus the net loss of $3.0 million for 2017 fourth quarter. The quarter’s pro forma revenue was $22.5 million.

Federal Legalization – Then What?

It is fascinating to step back and observe how the mindset of many in the cannabis industry seems to work. Let’s think through a couple of scenarios and have a peek at the landscape in a post-legalization world. Let’s begin with the following

After the Drama, Where Is Aphria Headed Now?

Even in a space with as much excitement as marijuana stocks, Aphria (NYSE:APHA) stood out for having as much drama as a cable TV show. After all the excitement, what’s next for APHA stock? And have the company’s recent moves made it investable again, or is Aphria only appropriate for the most steel-nerved traders?

In Other News

Grown Rogue

Grown Rogue International Inc. (CSE:GRIN) (OTC: NVSIF), a vertically integrated multi-state cannabis operator, announced that it has entered into a binding letter of agreement to acquire Decibel Farms, Inc., an organic cannabis producer and processor. Under the terms of the transaction, the acquisition will be structured as a tax-free merger and shareholders of Decibel will receive $2 million. Decibel owners Shawn Bishop and Buddy Wilson will join Grown Rouge as Vice President of Manufacturing and President of Sales, respectively.

Aphria

Aphria Inc. (TSX:APHA)(NYSE:APHA) announced that it has closed a $300 million private placement offering to institutional investors. The initial investors exercised their option to purchase an additional $50 million in notes, making the deal worth $350 million. The notes are senior unsecured obligations of Aphria with an interest rate 5.25% per year, payable semiannually on June 1 and December 1 of each year, beginning on December 1, 2019. The notes will mature on June 1, 2024.

TerrAscend

TerrAscend Corp. (CSE:TER)(OTCQX: TRSSF) today released its financial results for the fourth quarter ending on December 31, 2019. Revenue for the quarter was $5 million, up from $1.8 million in the previous quarter. Net loss was $11.7 million or $0.13 per share. The company has $21.7 million in cash and cash equivalents. “We are pleased with our performance in the fourth quarter and have laid the groundwork for success in 2019,” said Michael Nashat, CEO of TerrAscend, in a statement. “We are experiencing strong sales momentum in Canada and are making substantial progress towards becoming a leading US multi-state operator.”


Investor PlaceInvestor PlaceApril 24, 2019
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9min6010

Aphria is moving ahead, but questions remain.

By Ian Bezek, InvestorPlace Contributor Apr 22, 2019, 10:38 am EDT

Even in a space with as much excitement as marijuana stocks, Aphria (NYSE:APHA) stood out for having as much drama as a cable TV show. If you’re a trader, APHA stock has been a dream lately. The stock rocketed from $8 to $16 in a month last summer. It then lost as much as 75% of its value, plummeting to $4, after a series of short seller reports. Since then, the stock has bounced 150% off the lows to return to the $10 level, before earnings sent it falling once more.

After all the excitement, what’s next for APHA stock? And have the company’s recent moves made it investable again, or is Aphria only appropriate for the most steel-nerved traders?

Fallout From the Bearish Short Seller’s Reports

A few months ago, short sellers hit APHA stock with heavy fire. Bearish analysts published reports suggested that Aphria’s management had engaged in unscrupulous behavior.

The short sellers suggested that Aphria was engaged in all sorts of questionable if not worse activity. The short sellers said that the company had bought phantom assets in Latin America, engaged in various double-dealing and related party transactions, and numerous other red flags.

Aphria’s board of directors engaged an independent special committee to investigate the accusations. The special committee found some troubling factors, but its results also exonerated the company in various ways. Arguably the most important finding was that the committee confirmed that Aphria’s Latin American assets in fact exist and are progressing toward commercial activity.

The committee suggested that Aphria paid near the top end of a reasonable price range for the assets, but that there is a real business there, unlike the short seller’s reports which had claimed these transactions were largely imaginary.

New Management for APHA Stock

However, Aphria wasn’t blameless either. The board disclosed that: “it appears that certain of the non-independent directors of the Company had conflicting interests in the Acquisition that were not fully disclosed to the Board.”

Probably in conjunction with that, Aphria has seen major management changes. Former Aphria CEO Vic Neufeld has stepped down, as well as Co-founder Cole Cacciavillani. Neufeld, in particular, was implicated in several of the alleged misdeeds that the short sellers identified.

In his place, Aphria has appointed an interim CEO. Irwin Simon is now in charge, at least for the time being. Simon led Hain Celestial (NASDAQ:HAIN) for more than two decades, helping that company take a dominant position in the natural and organic foods space. While it is obviously a weak spot for Aphria not to have a permanent CEO in place yet, Simon seems to have capable hands to manage the company while it recovers from the reputational blows it suffered recently.

Aphria Has a Rough Earnings Report

As William White pointed out, Aphria plummeted on April 15 after an earnings report “with losses per share of 20 Canadian cents. This is a drop from the company’s earnings per share of 8 Canadian cents from the same time last year. It was also bad news for APHA stock by missing analysts’ losses per share estimate of 4.5 Canadian cents for the quarter.”

Revenue was up, but overall sales numbers fell. The market was unimpressed, and the stock is now down around 24% since the report.

Back in December, new upstart cannabis firm Green Growth Brands(OTCMKTS: GGBXF) bid to acquire Aphria. This was a highly unusual deal for several reasons. Among them, Green Growth brands itself had just gone public as the merger of several other firms. Additionally, Aphria had a significantly larger market cap than Green Growth, making it a rather odd target for a takeover offer.

After the earnings tumble, Green Growth stepped away from their takeover attempt. It may be good for Aphria that another element of uncertainty is gone, but it’s hardly unequivocal good news overall.

APHA Stock Verdict

It’s good that Aphria has cleaned house. That was a necessary and important first step in recovering the market’s trust in Aphria going forward. But there’s still a lot to be uncertain of.

Particularly in a market where so many of the big leaders in the space have deals with credible partners, it’s easy to take a pass on APHA stock. Cronos (NASDAQ: CRON) has Altria (NYSE: MO) while Canopy Growth (NYSE: CGC) has partnered with Constellation (NYSE: STZ). Meanwhile, Aurora (NYSE: ACB) doesn’t have a major partner yet, but its management team hasn’t given us any big reasons to doubt its credibility either.

The marijuana stock sector is the Wild West right now. Many of the companies out there are going to crash and burn in the coming years. Aphria’s efforts to clean up their act are appreciated. But in such a risky sector, at least for the time being, it’s advisable to stick to more trustworthy leaders in the cannabis space.

At the time of this writing, Ian Bezek owned MO stock. You can reach him on Twitter at @irbezek.

 


Debra BorchardtDebra BorchardtApril 15, 2019
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6min9250

Aphria Inc. (TSX: APHA) (NYSE: APHA) reported its results, for the third quarter ending February 28, 2019. The company delivered net revenue of $73.6 million up 240% from the prior quarter and 617% from the prior year. Still, the company reported a net loss of $108 million versus last year’s net income of $12 million for the same time period.

Irwin D. Simon , Aphria’s Chairman, and Interim Chief Executive Officer said, “Our organization has experienced significant change in a very short period of time which was necessary to propel the Company forward.  Our Board of Directors and executive team will remain focused on the advancement of Aphria’s leadership position in the global cannabis industry and we are pleased to have announced today the appointment of two new independent directors.”

The Board appointed two new independent directors, effective today. Walter Robb and David Hopkinson will fill two of the three current director vacancies. Walter Robb was a former co-CEO of Whole Foods Market. David Hopkinson serves as Real Madrid Club de Futbol’s (“Real Madrid”) Global Head of Partnerships. He joined Real Madrid in August 2018 and brings his 25 years of professional sports sales, marketing and leadership experience to Aphria.

Green Growth Brands

The company issued a separate press release and said it continues to recommend that Aphria shareholders reject the Green Growth Brands (GGB) Offer and to not tender Aphria shares to the GGB Offer.

Simon said, “We plan to use the $89.0 million in proceeds from the transaction to fund our strategic global expansion initiatives. On behalf of our Board of Directors and management team, we continue to recommend that Aphria shareholders reject the GGB offer and do not tender their Aphria shares to the GGB offer.”

GGB has entered into a share purchase agreement with GA Opportunities Corp. (GAOC) pursuant to which GGB has agreed to purchase for cancellation 27.3 million shares held by GAOC, for an aggregate purchase price of $89.0 millionThe terms of the Share Purchase Agreement include, among other things, that GGB will pay in cash $50.0 million of the Purchase Price to GAOC within 30 days of the date hereof and will issue a promissory note to GAOC for $39.0 million due in six months from the Closing Date.

Aphria has entered into a shortened deposit period agreement with GGB to facilitate the acceleration of the expiry of GGB’s offer to purchase all of the issued and outstanding shares of Aphria. Aphria has agreed to reduce the initial deposit period of the bid to 92 days from January 23, 2019. GGB will be mailing a Notice of Variation providing that the GGB Offer will expire at 5:00 p.m. on April 25, 2019. Based on the closing price of $3.86 per GGB share on the Canadian Securities Exchange on April 12, 2019 , the implied consideration under the GGB Offer would be $6.07 per Aphria share, representing a significant 54.7% discount to Aphria’s closing price on the Toronto Stock Exchange of $13.41 per share on the same day.

Latin America Assets

The company had formed a Special Committee as per the Ontario Securities Commission request as part of a continuous disclosure review that the company performs an impairment test on its LATAM assets subsequent to the filing of the 2019 second quarter financial statements. The committee concluded the review and found that the acquisition of LATAM assets was within an acceptable range, albeit near the top of the range of observable valuation metrics; the company’s investment in LATAM assets is approximately $225 million , after recording the aforementioned non-cash impairment charge, which is approximately $30 million more than the original agreed purchase price of approximately $195 million.

Mr. Simon continued, “We continue to take decisive actions to increase efficiency, including investing additional capital in automation and packaging and adapting production to a new growing method. While this contributed to an increase in our costs, we expect higher future yields per square foot leading to stronger results as we start fiscal year 2020.”



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