Short seller allegations against Aphria questioned by Bloomberg

A recent report is questioning allegations made against Leamington-based cannabis producerAphria. A short seller called the company's acquisition of Latin American and Caribbean assets "virtually worthless."

In December, short sellerQuintessential Capital Management published a report, accusing the company of making those purchases to only benefit insiders.

"In most instances, the entities acquired by Aphria exhibit little or no sales and operating activity, minimal assets and questionable corporate governance," the report said, detailing a visit to an 'herb house' in Jamaica that did not appear operational.

Bloomberg is now questioning those suspicions after reporter Ezra Fieser found an operating farm in Jamaica, with about 2,500 kilograms of dried flower in inventory and 300 cannabis plants.

Fieser also found a well-marked cannabis retail shop.

"Our reporter was able to find it, said it was quite clearly marked above the pizza shop in Kingston," said Kristine Owram, Toronto-based business reporter for Bloomberg.

"It was all set up with shelving and that sort of thing, but had not opened for sales."

She addressed the short seller's report about how cannabis sales aren't licensed yet in Jamaica, saying the country has put forward a bill in legislature and it could be approved "as soon as this year."

Another discrepancy Owram mentioned was Aphria's evaluation versus the short-seller's when it comes to the monetary value.

While the short sellersaid it totalled$280 million, Aphria's number was much lower at $193 million.SOL Global Investments Corp., the seller, said it was actually worth$298 million when it closed.

Owram said analysts from Scotiabank said it makes more sense to look at Aphria's number, because "that was what Aphria thought at the time it would be paying."

Compared to other Canadian cannabis companies and their acquisitions in Latin America, Owram said the analysts deem Aphria's purchase "quite reasonable, or even relatively cheap."

After the report was released last month,Aphria's stock price plummeted, falling to as low as $5 per share.

The allegations have sparked a number of lawsuits against the cannabis producer. A U.S. company called Green Growth Brands has also proposed a hostile takeover of Aphria.

Owram said that offer is strange because Green Growth "is a much, much smaller company than Aphria."

The offer is not yet official, but she said there's an indication that a firm offer will be presented as soon as next week.

Bloomberg's article was published Jan. 5. Aphria's stock price closed at $8.07 on Jan. 4 and it has climbed since then, closing at $8.92 on Jan. 9.