Canadian cannabis company Aphria Inc. confirmed Friday that its CEO and co-founder would be transitioning out of their roles, as it reported earnings for its fiscal second quarter that reflected the start of full legalization of the substance in Canada.
which is currently the subject of a hostile bid from an Ohio family that has made a fortune in the retail business, said Chief Executive Vic Neufeld and Co-Founder Cole Cacciavillani will leave the company now that their five-year stint is up. They will remain at the company to ensure a smooth transition and will stay on the board. The news was first reported by Canada’s Globe and Mail.
The company will seek a “globally-minded executive leadership team for the long-term benefit of the Company’s patients, shareholders, customers, and employees,” according to a statement.
Aphria shares plummeted in early December when short sellers Quintessential Capital Management and Hindenburg Reseach questioned some of the deals made by the company under Neufeld’s stewardship. The company said it would conduct an internal investigation and removed Neufeld from the chairman role.
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Then in early January, it was hit with the hostile bid, which revived some of the short sellers’ concerns, namely that the company is part of a network of reverse mergers and marijuana-focused acquisitions meant to enrich insiders at the expense of shareholders. The bidder, Green Growth Brands Ltd., is itself a company that has just completed a reverse merger and the math used in its bid is questionable, as MarketWatch has reported.
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Aphria rejected the bid, saying it “significantly undervalues the company” and that the proposed transaction carried considerable risks for shareholders. It acknowledged that Green Acre Capital, which took more than C$30 million from Aphria in the fiscal first quarter, is an investor in Green Growth, through one of its funds, but said an independent committee evaluating the takeover bid has no ties to either Green Growth or Green Acre.
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On Friday, Aphria said it had revenue of C$21.7 million ($16.4 million) in the quarter to end November, up from C$8.50 million in the year-earlier period. Revenue was boosted by the legalization in October of cannabis for adult recreational use, which boosted kilogram equivalents sold by 92%, along with sales of medical cannabis to existing and new patients.
The company had net income of C$54.8 million, up from C$6.46 million. The cash cost to produce dried cannabis rose to C$1.76 a gram from C$1.30.
“As expected, gross margins declined, reflecting lower effective selling prices in the adult-use market, as well as temporarily lower yields and higher production costs in the quarter as we moved aggressively to build out production facilities and implement new automation processes,” Neufeld said in a statement.
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Aphria is one of Canada’s largest producers of marijuana, with a market cap of about $2 billion. Shares jumped about 4% Friday, and have gained 20% in 2019 so far, while the S&P
has gained 3.2%.
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