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Cannabis stock report: Aphria climbs back as only the faithful remain

By Brandon A. Dorfman
Dec 07, 2018

After a pause in trading on Wednesday, the North American Marijuana Index fell again on Thursday, a lingering result of the continued impact of the recent short-seller attack on Aphria Inc. (NYSE:APHA) (TSX:APHA). Aphria itself managed to stay in the black on Wednesday, even as the short seller, Hindenburg Research released a second potentially-damaging report, calling into question Aphria’s relationship with Florida-based Liberty Health Sciences.

After days of spinning their wheels, Aphria appears to have put some sort of response plan into action, announcing the formation of a special committee to review the LATAM acquisition. It’s a basic, but welcome PR move to investors, though one they were clamoring for days ago.

“We are committed to protecting our shareholders and restoring market confidence by confirming all the facts through an independent process to rebut innuendo and deception,” said CEO Vic Neufeld in a statement. “Until then, it is business as usual at Aphria, as we continue taking significant steps to solidify our position as a premier global cannabis company.”

In fact, Aphria’s actions under Neufeld this week haven’t impressed anyone, save for a few diehards over in the weedstocks crowd. According to a report in MarketWatch, GMP Securities analyst Martin Landry has placed Aphria under review after previously rating the stock a buy with a $22 price target.

“We believe that management’s credibility may have been impacted by the allegations raised in this report,” Landry wrote in a note to clients Tuesday, according to MarketWatch. “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.”

[Cannabis comes to the Midwest: Michigan becomes 10th states to legalize recreational marijuana]

The North American Marijuana Index fell 4.17 points on Thursday, or 1.81 percent, to finish out the day at 226.41, with the United States Marijuana Index falling 1.73 points or 1.73 percent to 98.37. Meanwhile, up north, the Canadian Index gained 4.36 percent to end the day at 485.33.

The benchmark Horizon’s Marijuana Life Sciences Index ETF (HMMJ.TO) was back in black on Thursday, up CA$1.10 ($0.82) or 7.31 percent to end the day at CA$16.15 ($12.06). ETFMG Alternative Harvest ETF (MJ) fell $0.55, a decline of 1.96 percent to close out the day at $27.55.

Meanwhile in the markets…

On Thursday the arrest of Huawei CFO Meng Wanzhou in Canada inserted itself into U.S.-Chinese trade talks, sending the Dow plunging 785 points before it staged a late-day comeback, ultimately ending the day only 79 points down. Experts agree that the up-and-down action is a sign of uncertainty among investors as fears increase over a potential trade war with China.

Of course, President Donald Trump did nothing to help allay those fears when earlier this week he sent out ominous tweets calling himself “tariff man” and stating that he would use tariffs to "MAKE AMERICA RICH AGAIN." As CNN pointed out, it’s American companies and consumers who pay for these tariffs.

"It's an encouraging sign that we closed significantly off the lows on a day that could have been in the record books for downdrafts," said Art Hogan, chief market strategist at B. Riley FBR in an interview with CNN.

However, he did add: "I don't think we fixed any of the things we were worried about."

[These three marijuana stocks peaked just in time for the holidays]

The S&P 500 fell 0.15 percent or 4.12 points on Thursday while the Nasdaq rose 0.42 percent, or 29.83 points, after spending most of the trading day down.

Canopy Growth acquires German vaporizer company, Storz & Bickel

Canopy Growth Corporation (TSX:WEED) (NYSE:CGC) expanded its empire on Thursday, acquiring vaporizer company Storz & Bickel GmbH & Co. KG, along with their related entities and IP. A German manufacturer, Storz & Bickel deals in medically approved vaporizers under popular brand names such as the Volcano Medic and the Mighty Medic. Both of the company’s founders will join the upper management team at Canopy.

“Access to Canopy Growth's extensive portfolio of test laboratories as well as pharmaceutical and medical-scientific know-how opens up entirely new product development opportunities," said Jürgen Bickel, CEO, Storz & Bickel in a statement.

Bruce Linton, Canopy’s CEO, saw the acquisition as a way to prepare for the future.

"This Company is well positioned for the next wave of federally-regulated products in Canada beyond dried flower and edible oils,” said Linton in a statement. “By combining Canopy's existing designs and Canada's open environment for federally permissible R&D with Storz & Bickel's deep IP portfolio and management team, Canopy Growth is poised to lead the high-margin vaporizing category around the world."

MedMen employees fight back with class action lawsuit

Slipping under the radar on Thursday among all the Aphria hullabaloo was news of a class action lawsuit brought against cannabis retailer MedMen Inc. (CSE:MMEN) (OTCMKTS:MMNFF) by former employees. Multiple allegations of labor law violations were levied at the California-based chain store, according to a report in Marijuana Business Daily, in a suit that was filed in mid-November in California Superior Court in Los Angeles County.

[Cannabis stock report: Aphria continues to slide as Vic Neufeld loses control of the narrative]

MedMen, through their subsidiaries, are said to have failed to pay employees for hours worked while not providing proper rest and work breaks, among other things listed in the suit.

Daniel Srourian, the attorney for the two plaintiffs in the case, Chelsea Medlock and Anthony Torres told MBD that the case still needs to be certified for class action status and that it’s years away from being resolved, but, it could be a problem for the so-called Apple store of weed.

“It’s wage theft,” he told MBD in an interview.

Who’s up and who’s down?

Aphria Inc. (APHA:CA) gained $2.55 per share, an increase of 51.00 percent to end the day at $7.55… MedMen Enterprises Inc. (MMEN:CNX) rose $0.70 per share or 20.59 percent to end the day at $4.10… Liberty Health Sciences Inc. (LHS:CNX) gained $0.12 per share, an increase of 14.63 percent to end the day at $0.94.

[Cannabis stock report: Big tobacco saves Cronos; Aphria plummets as short-seller shenanigans continue]

GW Pharmaceuticals Plc (GWPH) fell $4.33 per share or 3.41 percent to end the day $122.72…Tilray Inc. closed out the day at $99.00, falling $1.26 per share, or 1.26 percent… Canopy Growth Corporation (CGC) dipped down $1.11 per share, a decline of 3.53 percent to end the day at $30.34.

And finally...

Somebody decided to start playing defense in the whole Aphria affair on Thursday, as Brady Cobb of SOL Global —formerly Scythian —told BNN Bloomberg why the assets his company sold to Aphria were on the up-and-up. Watch the whole interview below:

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