Why Aphria’s (APHA) Stock Is Crashing Today

Aphria (NYSE:APHA) stock crashed on Monday, with shares plunging 19.5% as of 11:41 a.m. EST after falling as much as 29% earlier in the day. This huge drop came after hedge fund manager Gabriel Grego announced a short position in Aphria and referred to the Canadian marijuana producer as “a black hole” for investors’ money.

Grego’s Quintessential Capital Management and forensic analysis firm Hindenburg Research jointly issued a report that expressed their belief that…

Aphria “is primarily a scheme to funnel funds from retail shareholders into insiders’ pockets.” This report stated that Aphria insiders bought positions in “virtually worthless corporate entities overseas through shell companies,” then led Aphria to buy these overseas companies at unjustifiably high prices.

As of the time of this writing, Aphria had not responded publicly to the allegations made by Grego. It’s always good to hear both sides of a story before reaching any conclusions. However, the report issued by Quintessential Capital Management and Hindenburg Research is concerning.

One aspect of the report is easy to confirm: Aphria indeed acquired three Latin American companies recently in whole or in part. In September, Aphria announced the closing of a transaction with Scythian Biosciences that gave Aphria a 90% stake in Colombia-based Colcanna, 100% ownership of Argentina-based ABP, and a 49% stake in Jamaica-based Marigold. It’s also true that Aphria Chairman and CEO Vic Neufeld was once chairman of Scythian Biosciences.

The report also seems to make a pretty good case that Aphria…

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