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

By Brandon A. Dorfman
Dec 06, 2018

The North American Marijuana Index took a much-needed pause on Wednesday as U.S. markets closed in honor of the passing of former President George H.W. Bush, with any-and-all trading taking place north of the border. Meanwhile, Aphria Inc. (NYSE:APHA) (TSX:APHA) remained in the spotlight for a third straight day as CEO Vic Neufeld told BNN Bloomberg that the company would prepare a “line-by-line” rebuttal to the short-sale attack that tanked share prices this week.

"We need a complete rebuttal, not a piecemeal rebuttal. There’s lots of allegations of impropriety, and we want our deck to speak on the facts," Neufeld said in an interview with BNN Bloomberg on Wednesday.

Gabriel Grego of Quintessential Capital Management, who shook down Aphria and the whole of the cannabis stock market with his report at the Kase Learning Short Selling Conference in New York on Monday seems to be enjoying his time in the spotlight as well. He told BNN Bloomberg he’s eager for the Licensed Producer to involve their attorneys, giving the whole affair the feel of a late 90s talk show.

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

"We have a long list of documents which we already know we’re going to request to review,” said Grego in the interview, referring to what his team would do in the event of a lawsuit. “We believe those documents contain smoking guns."

Regardless of right or wrong, it’s clear that at this point in the conversation the only loser is the cannabis industry at-large. Moreover, if Vic Neufeld can’t control the narrative, maybe it’s time for him to step down. Allowing this situation to go this far out of control is a fundamental dereliction of duty.

Both the North American Marijuana Index and the United States Marijuana Index recorded no movement on Wednesday as U.S. markets observed a day of remembrance for former President George H.W. Bush. The Canadian Marijuana Index fell 24.81 points, or 5.06 percent to finish the day at 465.07.

The benchmark Horizon’s Marijuana Life Sciences ETF (HMMJ.TO) fell again on Wednesday, dropping CA$1.20 ($0.90) or 7.38 percent to end the day at CA$15.05 ($11.24). The ETFMG Alternative Harvest ETF (MJ) saw no movement as markets were closed in the U.S.

Meanwhile in the markets...

With Wall Street quiet on Wednesday all eyes were up north, as Canada's main stock index rebounded while the loonie fell to its lowest level in the past year-and-a-half. The energy sector led the way on Wednesday, climbing 2.6 percent, while cannabis stocks helped pull the healthcare sector down six percent.

Like the United States, Canadian markets take some cues from President Donald Trump and his on-again, off-again love affair with tariffs. After markets fell up north on Tuesday following signals from the American President that tariffs were back in the picture, China gave some assurances to the contrary. Calming the markets down.

"That got people a little bit excited and I think that's carrying over to help the global growth story that's been pretty weak lately and that's really going to help the energy sector," said Michael Currie, vice-president and investment adviser at TD Wealth in an interview with the Canadian Press.

[Aphria shares plummet as short-sellers have investors doubting Vic Neufeld]

The S&P/TSX composite index closed up 119.05 points, finishing out Wednesday at 15,182.64.

Curaleaf wants it back

For some reason or another that remains to be seen Curaleaf Holdings, Inc. (CSE:CURA) (OTCBB:CURLF) initiated a share buyback program on Wednesday, with plans to spend up to $50 million buying back shares. According to a statement, the company believes their current market price is not indicative of their actual value, hence the buyback. That very well may be true, but there sure are a number of other things they could do with $50 million to add value to the company.

Canaccord Genuity analyst initiates KushCo a Speculative Buy

Earlier this week Canaccord Genuity analyst Bobby Burleson initiated coverage on KushCo Holdings (OTCMKTS:KSHB) with a Speculative Buy rating and a $7.50 price target.

"We view [KushCo Holdings] as a pick-and-shovel play on the rapidly growing U.S. legal cannabis industry,” wrote Burleson in his assessment. “By supplying packaging, labels and vape hardware, [KushCo Holdings] does not touch the plant, and the company is delivering strong top-line growth irrespective of which multi-state operators and branded consumer products win. With an outlook for revenue growth substantially above the industry rate (74 percent CAGR C18E-C20E) and a shift to higher-margin products, we expect healthy leverage for EBITDA going forward with margins improving from -15 percent this year to 10 percent in C2020."

[Marijuana stocks weekend investor roundup: Analysis of the week's most important events in the cannabis industry (November 30)]

He added, "We also believe [KushCo Holdings] commitment to R&D and scale within a fragmented competitive landscape is accruing meaningful competitive advantages during a period of regulatory arbitrage, when much larger packaging players remain sidelined."

Who’s up and who’s down?

Sunniva Inc (SNN:CNX) closed the day at $3.30, up $0.18 per share or 5.77 percent… Maricann Group Inc. (WAYL:CNX) rose $0.04 per share or 3.42 percent, ending the day at $1.21.

[Cannabis news briefs: New Jersey makes headway with cannabis legislation, hemp comes closer to legalization, and Lindsey Graham takes powerful new post]

Aphria Inc. (APHA:CA) fell $0.99 per share, a decline of 16.53 percent to finish the day at $5.00… Aurora Cannabis Inc. (ACB:CA) dropped $0.91 per share on Wednesday or 12.78 percent, ending the day at $6.21.

And finally…

Gabriel Grego is extending his 15 minutes as much as possible, this time with a little back-and-forth on BNN Bloomberg. Listen as he tells the interviewers that his Aphria report is not a condemnation of the cannabis sector —the same cannabis sector he singlehandedly tanked this week.

The full video is below:

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