Aphria Stock Forecast Following U.S. Sell-Off
Aphria Inc (OTCMKTS:APHQF, TSE:APH) is currently engaged in a sell-off of one of its major U.S. investments in order to comply with Canadian stock market regulations. Rather than hurt APH stock (its listing on Canadian markets), the Aphria stock price today shot up by about 7.5% as the industry as a whole looks to rally.
“While I continue to believe there is tremendous opportunity in the U.S. for medical cannabis, the sale of these shares serve the best interests of our shareholders,” said Vic Neufeld, Aphria’s chief executive officer in a statement on Monday. (Source: “Weed company Aphria sells part of stake in U.S. firm as it pulls from country,” Toronto Star, February 6, 2018.)
Aphria shed itself of 26.7 million Liberty Health Sciences Inc. (CNSX:LHS, OTCMKTS:LHSIF) shares at a price of $1.25 per share. Liberty stock subsequently plunged about three percent. Despite the sell-off, Aphria still maintains a 28.1% stake in the company.
The APHQF stock news today is that the company jumped in value along with the rest of the industry. The sell-off, it would appear, did not harm Aphria.
The marijuana producer engaged in the sell-off in order to comply with mandates from TMX Group Ltd (TSE:X)—which runs the Toronto Stock Exchange (TSE)—regarding companies operating in the U.S. According to the TMX Group, any company that is doing business in states where cannabis is legal is not in compliance with its listing requirements and could face delisting.
The reason for the change is the possibility of a President Donald Trump marijuana crackdown. With the Trump administration’s rescinding of the Cole Memorandum, an Obama-era guidance that allowed states to settle cannabis issues largely autonomously despite the drug still being illegal on the federal level, TSE regulators wanted companies to exit what is now a more volatile marijuana market down south.
Federal marijuana law in the U.S. supersedes state law, meaning that technically, all marijuana operations in the U.S. are illegal.
The Obama administration took a lax approach to this problem, however, allowing states discretion on how to deal with the drug and keeping federal enforcement out of it.
Trump, alongside known drug crusader Attorney General Jeff Sessions, has now paved the way for federal operatives to prosecute the drug more harshly, even in states where there is legislation protecting it.
Rather than face delisting, Aphria decided it best to divest itself of these direct operations. The result has been a jump in stock value, although it’s hard to judge whether the APHQF stock increase came as a result of this divestment, or due to an industry-wide rally that is taking place this week.
The company also recently signed a $20.0-million deal to sell its minority interest in Copperstate Farms, LLC to Liberty Health Sciences, again as part of Aphria’s efforts to exit any potentially troubling partnerships down south.
Regardless of whether Liberty Health Sciences and Copperstate Farms were good investments or not, the prudent move in the near-term was to avoid butting heads with regulators and face a potential delisting.
Companies don’t need controversy, especially in the marijuana market, when there are so many great options to choose from. Aphria’s move to smooth things over in Canada was a smart one. Whether it sparked a stock jump or not is unknown, but the Aphria stock forecast looks solid as the industry looks to rally in February.