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Did Aphria’s Q3 Earnings Resurrect Its Short Sellers?

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Aphria swings to losses

Early on April 15, Aphria (APHA) reported its third-quarter earnings. The company had quarterly losses of ~108 million Canadian dollars. The losses were due to an impairment cost of 50 million Canadian dollars following the writing down of the company’s Latin America assets.

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Resurrecting short sellers

Aphria received severe criticism from short sellers last year due to its acquisition of the Latin America business. Quintessential Capital and Hindenburg Research indicated that the acquisitions in Latin America were made at inflated prices. The short seller said that the acquisitions were worthless.

Back then, Market Realist said that “If true, the company would record the acquisitions on its balance sheet by paying a premium to what they cost and would later have to write down the premium paid as an impairment, which essentially destroys the asset value recorded and eventually destroys shareholder value.”

Aphria’s write down in the third quarter resurrected the short sellers.

What led to this impairment charge?

In the press release, Aphria said that the impairment was due to it reassessing the discount rate and financial forecast which it received from the advisers to its Special Committee. The company vehemently defended itself from short sellers. Aphria said that short sellers’ act was an attempt to make quick profits.

Aphria’s quarterly report fuels more anxiety about the cannabis market and puts pressure on other stocks (HMMJ) including Canopy Growth (WEED), Aurora Cannabis (ACB), Tilray (TLRY), and others.

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