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

Vic Neufeld CEO of Aphria Inc. in Leamington in February 2016.							Dan Janisse  Windsor Star

The short seller Quintessential Capital Management declared victory on its Aphria short thesis Friday after the cannabis producer said its CEO and one of its cofounders were transitioning out of leadership roles.

The Leamington, Ont. -based cannabis producer added that its co-founder Cole Cacciavillani is also stepping down from his executive role as vice president of growing operations as soon as a replacement is found, but will remain on the board.

Neufeld noted that building and leading Aphria has taken a toll on his health, family and personal priorities.

Cacciavillani is Aphria's second-largest shareholder with about a 2.9 percent stake while Neufeld has about a 0.8 percent holding, according to data compiled by Bloomberg.

Aphria CEO Vic Neufeld will step down, and the company will begin the hunt for new leadership immediately.

Aphria dismissed the accusations as "false and defamatory" and established a special committee to examine the transactions.

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Aphria has since become the target of a takeover attempt by Green Growth Brands, and there's renewed criticism in some quarters about insider connections between the two companies. In a tweet on Friday, Quintessential said it felt it had been vindicated, and "with a new management team the company has a chance to a brighter future and we are accordingly moving on to new projects".

Simon, Aphria's newly appointed chairman reiterated that and called Neufeld and Cacciavillani "consummate entrepreneurs".

The company, which recently received an all-stock hostile bid from USA cannabis retailer Green Growth Brands Ltd, said total revenue more than doubled to C$21.7 million (US$16.4 million). Aphria rejected the planned C$2.8 billion ($2.1 billion) hostile offer, saying the bid significantly undervalued the company. On behalf of the entire Aphria team, I want to express my gratitude to both.

Net income for the second quarter ended November 30, 2018, was C$54.8 million, or C$0.22 a share, compared to C$6.5 million, or C$0.05 per share for the same period past year. Net income was C$54.8 million or C$0.22 per share, compared with C$0.09 a share last quarter, with the increase related to gains on its long-term investment portfolio. The company said that the higher revenue in the quarter was driven by a 92% increase in kilogram equivalents of cannabis sold and an additional C$1.6 million of non-cannabis worldwide sales.

Outgoing CEO Vic Neufeld explained that the margin decline reflected "lower effective selling prices in the adult-use market, as well as temporarily lower yields and higher production costs in the quarter as we moved aggressively to build out production facilities and implement new automation processes". The average selling price fell to $6.54 per gram, from $7.12 per gram in the prior quarter.

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