Aphria: Our Response


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This morning, Aphria responded to our report detailing believed undisclosed conflicts of interest and signs of worthlessness relating to its LatAm transactions. The company’s response largely reiterated its earlier press releases touting the supposed worth of its acquisitions and did nothing to dispute our core findings.

We believe it is of utmost importance to note what the company did NOT say in response to our reporting:

  1. We alleged that the company acquired its supposed assets through a series of shell companies established by a key Aphria/Scythian insider and deal partner Andy DeFrancesco.

The company did not dispute the structure of these transactions.

  1. We alleged that the official registered office of Aphria’s Jamaica subsidiary is an abandoned building that was sold off by the bank earlier this year.

The company’s response: none.

  1. We alleged that Aphria’s Jamaica subsidiary leased “unit 51” of a building complex that only goes up to “unit 50”. In other words, “unit 51” didn’t exist.

The company’s response: none.

  1. We alleged that after 6 months, the company’s office lease in Jamaica had a paper sign on its door and showed virtually zero signs of activity.

The company’s response: none.

  1. We alleged that a purported director of Aphria’s Jamaica subsidiary denied IN WRITING that she had ever served as a director at the company.

The company’s response: none.

  1. We alleged that other supposed directors and supposed top scientists associated with Aphria’s Jamaica subsidiary appeared to either not exist or had no/limited online presence.

The company’s response: none.

  1. We alleged that the company’s much-touted cannabis licenses in Jamaica cost only about $500 to acquire and require minimal effort.

The company’s response: none.

  1. We alleged that individuals associated with key insider/deal partner Andy DeFrancesco purchased shares in the Jamaican entity for only US $118 (not millions) and flipped them months later for C$18 million.

The company’s response: none.

  1. We alleged that an employee of the company’s Argentine subsidiary stated that annual revenues were US$430 thousand, which directly contradicted press releases that annual revenues at the subsidiary were US$ 11 million.

The company’s response: none. We urge the company to release the audited financials for this entity.

  1. We alleged that the company’s supposed major “purchase order” with a local Argentine hospital was actually a donation.

The company’s response: none.

  1. We alleged that the company’s Colombian subsidiary was a newly-formed operation with exactly zero operating activity as of end of the year.

The company’s response: none.

  1. We alleged that the company’s supposed “strong” retail presence in Argentina consisted of exactly one tiny pharmacy.

The company’s response: none.

  1. We alleged that on current Scythian Chairman Andy DeFrancesco’s private Instagram account we saw his bragging about purchasing the very pharmacy into his own private equity firm one week before flipping the Argentine entity to Scythian for C$27 million (and hashtagging #GreedIsGood)

The company’s response: none.

  1. We alleged that the company’s supposed distribution business in Argentina consists of an empty, unfinished warehouse.

The company’s response: none.

  1. We alleged that Andy DeFrancesco has a deep longstanding ties to both Aphria & Scythian. In regard to Scythian, the company until recently listed its head office at the same address and suite number of the Toronto office of DeFrancesco’s private equity firm, the Delavaco Group. Scythian’s CFO until late September was Jonathan Held, who operates his consulting firm out of the exact same address and suite number as the Delavaco Group’s Toronto office. Delavaco’s COO was the “finder” of Scythian’s reverse-merger deal to take the company public. Delavaco participated in Scythian’s bought deals. DeFrancesco was named Scythian’s Chairman of the Board and Chief Investment Officer on the EXACT SAME DAY the company closed on its acquisition of the Argentine entity.

The company’s response: technically DeFrancesco wasn’t an insider.

  1. We alleged that Canadian regulators said Andy DeFrancesco has “little regard for the truth” and was involved in a forgery scheme. We alleged that DeFrancesco had business ties with multiple individuals the SEC has alleged to have committed securities fraud including Barry Honig, John Stetson, and John O’Rourke.

DeFrancesco’s response, per Barron’s: “Guys who put companies together come across each other and co-invest”

  1. We allege that the company did not have all its required licenses in Colombia needed for cultivation.

The company’s response: Admits. The company was granted a characterization permit “allowing the company to assess seeds and initiated a pilot test of its strains prior to full scale cultivation.”

All told, we find the company’s response to be supremely underwhelming. We note with some amusement the following line from the response:

“Since closing this important strategic acquisition in September, we have made considerable progress supporting and building out our operations on the ground in Latin America and the Caribbean.”

Typically, when a company makes an acquisition for C$280 million it purchase assets that already exist, not ones that need to be built out later. Note that our on-the-ground visits were recent, ranging from September to November of this year.

We demand that the company actually respond to our research and allegations. In addition, we demand the following information from the company:

  • Who are ALL of the shareholders of the acquired shell companies? In filings with the Canadian Stock Exchange the company REDACTED the names of the beneficiaries of these deals. (1, 2)
  • Did the beneficiaries of these shell deals include Aphria insiders, their spouses, family members, or other deal partners?
  • We do not place any value in the ‘fairness opinion’ that Aphria bought to justify this transaction. We note that the bank that issued the opinion, Cormark Securities, has been an underwriter in Aphria’s dilutive bought-deal financings and was the same bank that provided a ‘fairness opinion’ for Aphria’s Nuuvera transaction. Recall that we had also identified signs of worthlessness and undisclosed related-party dealings relating to the Nuuvera transaction in our earlier reporting. Nonetheless, the company should release this document and make it available for public scrutiny.

Shareholders deserve FULL TRANSPARENCY on these issues and we will continue to report on this subject until they receive it.

Disclosure: We are short APHA.

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26 thoughts on “Aphria: Our Response

  1. So instead of making alleged accusations, provide proof. Until then you are scum of the earth shorters that should be brought up on charges for making fraudulent statements.

    1. They presented proof. There’s an entire video presentation if you dont feel like reading. Bad investors who pump without reason are the scum of the earth.

      1. Solid research. APH has some explaining g to do. Andy should likely be in jail but white collar crime in Canada is rewarded. Evidently Andy is the scum of the earth. I hope his wife gets herpes.

    2. Shorters play a vital role in keeping companies honest and ensuring stocks are valued accurately. It’s no different than taking a long position and then publishing positive findings.

    3. Spoken like a moron who should spend more time researching before putting money in just because everyone else is.

  2. Why would the company take the time to respond to a blatant hit-piece? You admit you’re short and are motivated. Thanks for the cheap shares by the way, I hope you guys buy some shares, you’ll need the cash when you’re litigated out of business.

  3. Take away their passports ASAP!!! Too much $ involved and too many connections to overseas countries. Where are attorney Generals and why isn’t this stock HAULTED!

  4. Why has no regulators or authorities in USA or Canada have taken your allegations seriously if you claim something as serious as straw buying , etc? If there is factual evidence in any of your presentation should they not be halting, suspending operations and laying criminal charges.Or regulators and authorities were insiders on it too?

    Why did two different companies agreed on this deal as fair sale value for assets being acquired? They carry insurance covering their professional advise, advise that costed over $100k usd and suppose to protect investors. Same companies were behind many deals for other corporations not affiliated with Aphria.

    Where is the videos, interviews, actual filings supporting much lower revenues and values you allege? This is 2018, show some recent info – some sale records of what was paid by prior owners, taxes that were paid on revenues etc. comparable figures. Add some solid facts not pictures and assumptions that look like some paparazzi tabloid.

    Most importantly stop inflating figures and using currency to your advantage, all deals are on-line 190m was paid for assets you question. Being paid mainly in APH shares too. Do you have proof of insider transactions, who made how much and how many aph shares did they dump after sale closed?

    Any company will have shells in foreign countries were they trying to build a base. You need to be domiciled, these are 3rd world countries where on earth did you think they were buying some prestige facilities? These are tropical countries designed for plantation grow, low cost outdoor fields. They acquired land, local address, licenses and relationships. Not a facility or a highrise office building. You know other assets aside form physical structures. Just like patents, rights, exclusive agreements. Plenty of companies buy their way into future markets at x costs, they look at long term value of the non physical assets. Just like you can’t get another coffee shop license in Amsterdam, they just don’t issue them. What those assets will be worth in 5-10 years is a true value of loss or gain.

    If 190m in SA burns at $0 return what does that do to Aphria? Company that has facilities with more on the go in Canada & Europe that is capable to produce 300m in quarterly stock at full capacity. We just went rec , don’t even have edibles , concentrates or drinkable s and already at shortages….bigger picture? Don’t think you questioned their Canadian operations that make up 90% of the company once, yet entire enterprise is a fraud.

    You made an elephant out of fly for your personal gain not to warn authorities or protect any shareholders.. You are here to do opposite, drive panic and take money average people loose.

    https://grizzle.com/hindenburg-hit-piece-fyi-aphria-upside-not-driven-by-latin-america/

  5. Good work guys. Quality stuff. APHA’s answers are wholly insufficient and suggest there is lots of fire generating the smoke. I made a few $$$ riding APHA in August from ~8 to 21. Sold at $21. I was looking for re-entry but your solid research has made that undesirable – even at these levels. KEEP THEM HONEST. I am happy if you made a few $ on the research. Keep me informed of future lemons you discover.

  6. when you say you do care about shareholders how do you care when you put so many people to bankruptcy.Or you care for yourself to make your millions.
    You are scam not Aphria

    1. Yeap! Single parent here just lost a lot of money. Thanks a lot! Please share your profits with other share holders if your actually are in it for the good….

  7. If this is the truth these slime balls should go to jail for a long time. I’m cashing out of whatever I have left in the morning. FBI should be raiding the homes and bank accounts of these people and freezing all their assets yesterday.

  8. What you know about the LATAM transaction and strategy is a fraction of what the company knows. Aphria was not just buying licenses and real estate in these countries, they were buying time. Though the monetary cost of securing a license may be low, the time involved would have been long. Getting instant access to licenses means that they can commence bringing in revenue much sooner and also means they could move at the same time as competitors.

    The LATAM strategy was perfectly rational and not about dilapidated buildings. These guys are not fools. They have been quite diligent and thoughtful in terms of building shareholder value. There is great value in LATAM when the purchase is placed in it’s proper perspective.

    You folks are reportedly operating from a virtual office. Your risk here is minimal. If you are succesfully sued for the great damage you have done, you will likely walk away unable to make anyone whole. The greed that (as reflected by your clear desire to completely ruin this company as opposed to pointing out issues so they can be reasonably remedied) underpins your actions is astounding.

    You deliberately tried to take out as much shareholder value as possible for your own greed. Animals like you do not care about the average investors who lost signicant money and will go through significant hardship with their families.

    Everything has context.

  9. I would like to know if Andy D is an insider of Aphria. He does business wigh Aphria. It doesnt mean hes an insider. Any proof?

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