Market Overview

Aphria's Sell-Off Is Burning Cannabis Stocks

Aphria's Sell-Off Is Burning Cannabis Stocks
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Aphria Inc (NYSE: APHA)'s bad week got worse Thursday, with the latest revelation from the company it has constituted a special committee of independent directors to review its acquisition of Latin American holdings, which was completed Sept. 27.

Aphria shares are lower by another 12 percent following a 45-percent drop between Monday and Tuesday. The market was closed Wednesday for former President George H.W. Bush's funeral. (Editor's note: The stock ended up closing Thursday at $5.54 per share, up 22.8 percent.)

A Week To Forget

Aphria's woes started when it was called out as a short target, with red flags raised concerning the financial soundness of its acquisition targets and the connections some Aphria insiders had with the target companies. Aphria believes the report is a "malicious and self-serving attempt to profit by manipulating Aphria's stock price at the expense of Aphria's shareholders."

On Tuesday, the company made another clarification through a press release that it stands by its LatAm acquisition, and the deal was done in all fairness.

On Thursday, however, Aphria said a special committee will review the transaction to confirm its belief it "conformed with all company policies and generally accepted corporate governance practices."

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Sector Sells Off

The cannabis space, which had fairly weathered the broader market downturn seen since early October, is seeing intense selling Thursday, with Aphria's travails copping much of the blame. The broader market is also trending lower, extending the steep sell-off witnessed Tuesday.

Stocks like  Canopy Growth Corp (NYSE: CGC), Cronos Group Inc (NASDAQ: CRON), Aurora Cannabis Inc (NYSE: ACB) and Tilray Inc (NASDAQ: TLRY) are retreating in sympathy with Aphria.

  • Tilray, which recently announced a $2.9-million strategic investment in cannabis retailer Westleaf, was down 5.3 percent to $94.90 at time of publication.
  • Canopy Growth shares were down 8.8 percent to $28.68.
  • Cronos was slipping 3.8 percent to $10.33.
  • Aurora Cannabis shares were sliding 9.2 percent to $4.90.

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