Grego, whose firm also targeted Greek retailer Folli Follie SA earlier this year has now taken on one of Canada’s largest marijuana companies.
In a conference in New York on Monday, Grego alleged that Aphria Inc. has diverted about half of its net assets into inflated investments held by insiders. He also said the company which had a $2 billion market capitalization last week, is a “black hole,” according to a report he ran in conjunction with Hindenburg Research, a forensic analysis firm based in New York. Both firms are shorting Aphria.
In the report, Quintessential Capital Management alleges that “What would seem at the surface as a successful cannabis company, hides instead a more sinister reality. Based on a careful collection, analysis, and interpretation of the facts, we are of the strong opinion that Aphria is part of a scheme orchestrated by a network of insiders to divert funds away from shareholders into their own pockets.”
The report points out that this has nothing to do with the marijuana industry, simply because any new and exciting industry will almost always draw its share of unscrupulous characters out to make a fast buck. Instead, this is a story about one of the larger companies in the industry that appears to have diverted a tremendous amount of money toward the private interests of its insiders at the direct expense of its public shareholders.
Aphria, based in Leamington, Ontario, didn’t immediately respond to Bloomberg on a request for comment on the report. However, Aphria shares tumbled 29 percent in pre-market trading, and if this is sustained, it will be the biggest one-day share drop since it went public.
QCM’s last report was published in May of this year and focused on Greek retailer Folli Follie. The report alleged widescale inflation of revenue. Following publication, FF’s stock dropped 60 percent in two days and was suspended two weeks later. In July 2018, the company filed for protection from creditors through the Greek bankruptcy code. Management is now facing criminal charges and shares have not resumed trading.
