A report from a shorter that sent shares of Aphria (Aphria Stock Quote, Chart TSX, NYSE:APHA) tumbling Monday has resulted in GMP Securities placing the stock under review due to the perception that management’s credibility may be impacted.
Yesterday, a U.S.-based short-seller Gabriel Grego of Quintessential Capital Management echoed a report from Hindenburg Research that called the company a “black hole”.
“Our target price for Aphria is zero,” The Financial Post reported that Grego told attendees at a conference Monday.
Aphria responded immediately to the development, calling the shorters “malicious” and “self-serving”.
“Investors should exercise caution in relying on the misrepresentations and distortions contained in the report and recognize that, by its own admission, Hindenburg Research “stands to realize significant gains in the event that the price of any stock covered herein declines,” an anonymous director said. “The report also states that, “Hindenburg Research makes no representation, express or implied, as to the accuracy, timeliness or completeness of [the information in report].” The report makes reference to the company’s LatAm acquisition, which closed on Sept. 27, 2018. In connection with this transaction, the board of directors of Aphria confirmed that it received financial advice and a fairness opinion from a reputable firm that the consideration to be offered by Aphria in respect of the transaction was fair, from a financial point of view, to Aphria and its shareholders.”
GMP analyst Martin Landry weighed in on the issue.
“Aphria’s shares have been subject to extreme volatility in the last two days following the publication of a negative report by a shareholder who had a short position,” Landry says. “We believe that management’s credibility may have been impacted by the allegations raised in this report. It is unclear at this point how the company will re-establish trust with investors. Hence, until we have more visibility on the action plan of Aphria’s Board of Directors, we will put our rating and target Under Review.
Landry today changed his rating on the stock from “Buy” with a $22.00 target to placing both the rating and target “Under Review”.