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Dec 13, 2018

Aphria to issue rebuttal 'as soon as possible' after internal review

Aphria short-seller Grego speaks out as pot firm vows ‘complete rebuttal’

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Aphria Inc. (APHA.TO) plans to issue a full rebuttal as soon as possible to a short-seller report alleging it acquired a number of Latin American assets at “vastly inflated prices” once its internal review behind the transactions with an independent committee is completed.

Aphria’s update ends several days of silence from the company after its chief executive officer, Vic Neufeld, pledged to release a detailed, line-by-line response to the report released by Hindenburg Research and Quintessential Capital Management. It alleges the Leamington, Ont.-based cannabis producer acquired assets in Jamaica, Argentina and Colombia in a transaction the short sellers claim benefited a group of insiders.

“As we said previously, we are committed to protecting our shareholders and restoring market confidence by confirming all the facts through an independent process to address innuendo and deception,” said an Aphria spokesperson in an email to BNN Bloomberg. “We have full confidence in the work being done by the special committee’s independent directors and their independent advisors to review and confirm the company’s record.”

The Aphria spokesperson said the work will be presented “as soon as possible” but the company will allow the special committee to “complete its work so that there can be no doubt of the conclusions presented as a result.”

The Aphria spokesperson added that information has surfaced independently that appears to discredit several allegations put forward by QCM and Hindenburg Research. The spokesperson wouldn't specify in the statement where that information was sourced from and was not immediately available for comment.



In a Dec. 3 report, QCM and Hindenburg allege that the foreign companies Aphria acquired in Jamaica, Argentina and Colombia appear to be “largely worthless” and that there were "systematic attempts to hide the true nature of these transactions." The report led to a freefall in shares of Aphria, which at one point lost about half of its market value, or about $1.2 billion.

The company’s stock traded at $6.92 on the Toronto Stock Exchange as of 2:46 p.m. ET on Thursday, down about 34 per cent since the release of the short-seller report.

Both QCM and Hindenburg have taken short positions in Aphria, meaning they stand to benefit if its stock falls.

Neufeld told BNN Bloomberg on Dec. 6 the allegations published in the report, specifically several claims relating to Aphria's acquisition of its Jamaican cannabis licence from SOL Capital Investments Corp., formally known as Scythian Biosciences Inc., were "slanderous."

Both the Ontario Securities Commission and the U.S. Securities and Exchange Commission have so far declined to comment on whether they have begun an investigation into Aphria or the short sellers' report on the company.

QCM tweeted on Dec. 12 that it stands by its research and hopes Aphria “will address all the allegations exhaustively.” 

The company’s founder Gabriel Grego declined to comment to BNN Bloomberg when asked if the firm still maintains a short position on Aphria.

An unverified Twitter account belonging to Hindenburg Research responded to Aphria's statement on Thursday, stating that if the short sellers' report "was so false and 'slanderous' it would have taken two days to respond, not two weeks." 

Cannabis Canada is BNN Bloomberg’s in-depth series exploring the stunning formation of the entirely new – and controversial – Canadian recreational marijuana industry. Read more from the special series here and subscribe to our Cannabis Canada newsletter to have the latest marijuana news delivered directly to your inbox every day.