Aphria stock falls nearly 28% after short-seller report

TORONTO Shares of cannabis producer Aphria Inc. plummeted nearly 28 per cent after short-sellers called the Canadian company a “black hole” and alleged that its recent international acquisitions totalling roughly $280-million were “largely worthless.”

Quintessential Capital Management and Hindenburg research alleged in a report published online Monday that the Leamington, Ont.-based pot grower had acquired foreign companies in countries including Jamaica, Argentina and Colombia at “vastly inflated” prices and in ways it believes benefit a group of insiders.

“Aphria is part of a scheme orchestrated by a network of insiders to divert funds away from shareholders into their own pockets,” the report said.

Aphria shares fell as much as 29 per cent to $7.38 in heavy trading in Toronto on Monday morning. The Leamington, Ont.-based pot firm’s shares recovered slightly by Monday afternoon, but then slipped again to close at $7.60 or roughly 27.7 per cent lower than its closing price of $10.51 on Friday. After Monday’s plunge, Aphria has a market value of $1.9 billion.

On the New York Stock Exchange, where Aphria listed its shares in November, its stock was down as much as 30 per cent to US$5.60. The stock closed at US$6.05 or 23.4 per cent lower than its previous closing price of US$7.90.

Quintessential and Hindenburg called the company a “black hole for shareholders’ money” and said they are short on Aphria. By selling shares short, investors make money when the price of a company’s stock falls.

Aphria, one of the largest Canadian pot firms by market capitalization, called the short-sellers’ claims “false and defamatory.”

The report is “a malicious and self-serving attempt to profit by manipulating Aphria’s stock price at the expense of Aphria’s shareholders,” it said in a statement.

Many Canadian cannabis shares were on a tear in the lead up to Oct. 17, when Canada became the second country in the world to legalize pot for recreational use.

In its lengthy, scathing report published on Monday, Hindenburg and Quintessential said Aphria’s recent Latin American acquisitions “raise major red flags” and “appear to be largely worthless.”

Much of the short-sellers’ allegations have not been independently verified.