One company’s shares fell rapidly as short seller published report on “worthless” acquisitions.
Shares in Canadian cannabis company Aphria Inc. fell to their lowest level in more than a year earlier this week after a short seller published a report alleging the company has wasted hundreds of millions on foreign acquisitions that are effectively worthless.
At a short-selling conference in New York, Gabriel Grego of Quintessential Capital Management outlined his report on the Leamington, Ont.-based company, calling the company a “black hole for shareholders’ money.”
Aphria’s stock plunged on both the Toronto and New York stock exchanges Monday, at one point falling to a new 52-week low of $7.38 per share in Toronto, down 29.8% from Friday’s close of $10.51.
It is just one of many growing pains since Canada permitted the legal sale and purchase of marijuana in October with companies and regulators alike struggling to find their feet.
While Grego laid out a number of reasons for why he thinks Aphria is overvalued, his main argument is that he says the company spent $700 million buying up subsidiaries in the Caribbean and South America that don’t add any value to the company.
Quintessential Capital Management alleged Aphria acquired foreign companies at inflated prices in ways that it believes benefited a group of company insiders.
“In most instances, the entities acquired by Aphria exhibit little or no sales and operating activity, minimal assets and questionable corporate governance,” he said.
Aphria called Grego’s allegations false and defamatory.
“The company is preparing a comprehensive response to provide shareholders with the facts and is also pursuing all available legal options against Quintessential Capital,” it said in a statement Monday.