Marijuana accumulates losses and Aphria (APHA) became stronger on Thursday, as the Canadian cannabis producer fought a short-term seller claiming that some of its acquisitions were manipulated to surreptitiously enrich the members of the company.
Aphria said that an independent panel was appointed to review those offers, which involved the acquisitions of companies in Latin America. But while struggling to defend a short seller's report on Monday, one of the companies behind him posted new charges on the company after Thursday afternoon.
That company, Hindenburg Research, said yesterday that it unearthed "multiple irregularities" related to a company called Liberty Health Sciences, which the company said was supported by Aphria. These conclusions, Hindenburg claimed, "raise more questions about a self-appointed privileged privileged information."
At the beginning of Thursday, Aphria, in a statement, said that his meeting "reiterated his confidence" in the process that led to Latin American acquisitions. The affirmation said that the advice was next to the Latin American operations of Aphria.
"With everything," said Aphria, "in the face of inaccurate and deceptive accusations by certain short-term sellers, whose only interest is to benefit from a decline in the company's actions, is carrying out a comprehensive review, led by a Special Committee of independent entities, directors of these, and any other, allegations in order to protect the shareholders of Aphria. "
Aphria said that John M. Herhalt, an independent director, would chair the commission. Directors Shlomo Bibas and Tom Looney would also be in committee. Aphria said each member was independent and joined the board after Latin American acquisitions closed.
CEO Vic Neufeld added: "We are committed to protecting our shareholders and restoring market confidence by confirming all the facts through an independent process to reject the hint and deception."
According to a story by BNN Bloomberg on Wednesday, Neufeld said the company would soon provide a "line-by-line" response to Monday's report, released on Monday by Quintessential Capital and Hindenburg Research.
That report called Aphria a "shell game with a cannabis deal on the side." Aphria on Monday called the "false and defamatory" report and said she was pursuing legal options.
Aphria Stock Rebounds, Marijuana Stocks Crash
However, the stock of Aphria closed 33% in the stock market today, after falling to 17% before.
Among other marijuana stocks, Canopy Growth (CGC) fell by 3.8%. The Cronos group (CRON) declined 2.7%. Aurora Cannabis (ACB) dropped 2.2%. Tilray (TLRY) lost 1.3%.
Aphria shares listed on the New York Stock Exchange last month. Many stocks of marijuana had a lower tendency since Canada's recreational legalization in October.
The short-seller report on Monday stated that Andy DeFrancesco, a former Aphria promoter, would establish or acquire an international company. That company would be bought by a Canadian shell controlled by the private company DeFrancesco, Grupo Delavaco, according to the report.
The shell company would then be picked up by a company called Scythian Biosciences, according to the report. Neufeld and DeFrancesco maintain "key roles of privileged information" in this company, the report said. Scythian would then sell his interest to Aphria at an inflated price.
"As a result," the report said: "DeFrancesco and its unnamed partners get money and / or actions from Scythian, Scythian receives cash and / or shares from Aphria and Aphria's shareholders obtain international assets that are essentially useless."
In total, the report said that Aphria has spent more than $ 280 million in acquisitions that "seem to have clear signs of self-destruction of insider information" in Latin America and Jamaica.
The report claims that three of the entities absorbed by Aphria in the acquisition unit: Marigold Acquisitions in Jamaica, MMJ Colombia Partners in Colombia and MMJ International Partners in Argentina, once they had "Delavaco" on their behalf. The names have changed before their purchases were announced.
The report alleged, among other things, that the registered office of Marigold was an abandoned building.
In Argentina, the alleged report, ABP, an Aphria company acquired, had a small pharmacy for its name. The visit to an ABP site described as a distribution center seemed an unfinished warehouse, with a table and some boxes stacked, the report reported. Scythian said ABP sales last year reached more than $ 11 million. But the report, citing an employee, said sales were in fact only $ 430,000.
Brady Cobb, CEO of SOL Global Investments, formerly Scythian, told BNN Bloomberg on Thursday that the report was "almost completely false" and that companies "did not point to what they were looking for."
For example, he said he found a "herbal home" from Marigold in Jamaica, which companies claimed they could not find, was a matter of walking fifteen to twenty feet.
And he said that the companies did not do due diligence in the tracking of a farm site whose existence they questioned.
He also rejected previous questions that the regulators raised about DeFrancesco's history, saying he was someone who was "ahead of the curve" and that he did business with integrity.
"These operations were carried out in accordance with Canadian law and securities laws," he said about acquisitions. "These transactions were examined by the different stock exchanges."
In response to the report on Monday, Aphria on Tuesday stated that "it is unequivocally behind" of its Latin American operations. The company said that the acquisitions were verified independently and completely and included visits to the site. Aphria also said she had almost 100 employees in the region. He also said that acquisitions were made at a consistent price with the industry.
DeFrancesco, in an interview with the Financial Post, said that "the majority" of the report was inaccurate. Of the photos that seemed to be vacant or minimally occupied buildings or offices in the report, he said: "I'm not sure when these photos were taken."
He also said that using shell companies to make an acquisition was a relatively common practice.
Aphria, on Tuesday, said that Marigold in Jamaica was fully operational, with licensed cannabis and R & D. Marigold's cultivation farm had taken about 2,500 kilograms of cannabis to date, said Aphria.
Aphria also said that the company in question in Colombia, Colcanna, "received" licenses to grow, process and export cannabis. ABP, in Argentina, delivered 1,500 bottles of Aphria Rideau CBD oil to a hospital for a clinical study, he said.
Quintessential said Aphria's response did not address its main conclusions about acquisitions, its structure or doubts about property addresses.
The new discoveries of Hindenburg, published on Thursday, claim that Liberty Health Sciences, a cannabis company, bought a Florida property through a shell whose holders included Aphria, Scythian, DeFrancesco and others. This acquisition allowed holders to obtain a profit of $ 5 million in their investment within six days, Hindenburg claimed.
Hindenburg also claimed that "unnamed people" purchased 242 million Liberty shares for $ 0.001 per share in private placement "just days after Aphria announced its intention to buy its shares at 208x the price."
Hindenburg stopped saying Neufeld partook in that deal. Aphria did not respond immediately to questions sent by email at the end of Thursday. These questions belonged to whether Neufeld participated in the agreement, if he had or would file a lawsuit against Hindenburg and Quintessential, and when the company would offer a more detailed response to both reports.
According to Hindenburg, Neufeld and DeFrancesco are directors in Freedom. The company said that in January, Liberty announced plans to buy a company called 242 Cannabis, a company that oversees shells without operations, the report said. The subsidiary of this company had an agreement to buy real estate in Florida.
Liberty paid about $ 13.5 million for that property, said Hindenburg. But his report alleged that DeFrancesco paid $ 8.5 million Canadian property six days earlier. 242 Cannabis shell companies, alleged by Hindenburg, were registered in the DeFrancesco spouse.
Holders of these shell companies also included the investor Barry Honig. Honig has recently been accused by the SEC to orchestrate a pumping scheme. He also helped to turn a biotechnology company into the Riot Blockchain (RIOT) team.
The actions of Riot Blockchain rose last year, then they fell when the fervor surrounding Blockchain technology bothered and the questions arose over their operations and acquisitions.
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