Aphria CEO and co-founder stepping down

Pot Producer Aphria’s CEO to Step Down Following Short Seller AllegationsMore

The Canadian cannabis producer Aphria reported mixed quarterly results Friday morning that were overshadowed by news that its cofounder Cole Cacciavillani and its CEO, Vic Neufeld, would transition out of their executive roles in the coming months.

The stock lost more than 50 percent of its value after the December 3 report but has since recouped much of that, including a 6.2 percent gain to C$9.25 at 11:15 a.m.in Toronto. Neufeld denies his stepping down has anything to do with the short-sellers report, saying, "It was just time for us to move aside". "This has nothing to do with the short-sellers' report, the review, the valuation of assets".

Irwin Simon, the company's newly-appointed chairman, also spoke during the conference call, noting that he sees many similarities between the cannabis industry and the natural organic sector that he first worked in almost three decades ago. He added, "the Aphria dream would not have become a reality without them".

In a news release, Neufeld recalled the roots of the company in a Leamington greenhouse operation where Cacciavillani was growing "millions of potted flowers" five years ago, when the Canadian medical marijuana market opened.

"A top priority for Aphria is expanding production and automation to secure our long-term cost and scale advantages", said Neufeld.

In a note to media, Aphria said that "working closely with Irwin D. Simon, Aphria's recently appointed independent Chair, and President Jakob Ripshtein, Mr. Neufeld and Mr. Cacciavillani intend to complete a smooth and responsible transition to a globally-minded executive leadership team for the long-term benefit of the company's patients, shareholders, customers, and employees". He would not quantify how much longer the process will take, but said it would take longer than "days".

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Revenue for the company's second quarter totaled C$21.7 million ($16.4 million), up from C$13.3 million ($10 million) the quarter before and C$8.5 million ($6.4 million) in the same period a year ago.

The company's story was further complicated in late December with a hostile takeover bid by an Ohio-based marijuana company, Green Growth Brands.

In its management's discussion and analysis filing, Aphria said it is "unable to determine whether there will be any potential regulatory and/or enforcement action resulting from [the short-sellers report] or, if any such action is taken, whether it will have a material adverse effect on the company's business, financial position, profitability or liquidity".

Cannabis sales rose 92 percent to 3,409 kilogram equivalents, with more than 1,900 kilograms of that sold to the Canadian recreational market after pot was legalized on October 17. Sales to the adult-use market, which had a lower average selling price of C$6.32, inclusive of excise tax, compared to C$7.51 in the medical-use market.

"Annualized harvest expected to increase to 255,000 kilograms by the end of calendar 2019", said the company in a statement. Year-to-date, APHA has gained 22.67%, versus a 3.25% rise in the benchmark S&P 500 index during the same period.

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