Special committee findings
This morning, Aphria (APHA) released a report on its special committee’s review of its Latin American deal that came under criticism from short-seller Quintessential Capital claiming that Aphria diverted investors’ funds to companies in Latin America that were linked to insiders.
The special committee found that “certain of the non-independent directors of the Company had conflicting interests in the Acquisition that were not fully disclosed to the Board.”
As a resolution to this finding, the board has agreed to:
- review the composition of the board to include most independent directors
- enforce controls when it comes to assessing and managing risks related to transactions, acquisitions, and material contracts
- establish a formal process for strategic transactions
- ensure full disclosure of ownership that could expose the company to conflicts of interest
- consult external advisors and experts before engaging in transactions or other matters
While addressing these issues, the company also commented on the acquisition of the Latin American (or LATAM) deal itself. The committee found that the acquisitions in LATAM were “verified to be in place and continued to develop according to the Company’s business plan.” The existence of assets in the LATAM market were also confirmed by advisors after an in-person site review. Lastly, the committee found that the prices paid to acquire the LATAM assets were in line with similar acquisitions by competitors.
In closing, Aphria’s independent chair, Irwin D. Simon, stated, “With this behind us, we are committed to fully focus on our bright future and creating value for all Aphria shareholders.”
This development certainly brings some confidence back to Aphria’s investors (HMMJ), and the stock was trading nearly 4% higher as of 11:30 AM EST. Canopy Growth (WEED) was also trading 2.6% higher after its earnings beat, while Cronos Group (CRON) was up by 2.8%, and OrganiGram (OGRMF) was up by 1.3%.