• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Stocks

Aphria's Hostile Takeover by Green Growth Doesn't Looks so Hostile

Both Aphria and Green Growth's stock prices have sold off since the announcement.
By DEBRA BORCHARDT
Dec 31, 2018 | 08:48 AM EST
Stocks quotes in this article: APHA, LB

After the market closed last Thursday, Green Growth Brands Limited, also known as Xanthic Biopharma Inc. (CSE: GGB) made a "hostile bid" for Aphria Inc. (APHA) The deal has been met with great skepticism from cannabis industry market watchers. It's been called a "Highly Irregular Deal" by Hindenburg Investment Research and a "Publicity Stunt" by Cornerstone Investments.

Green Growth Brands said in the press release it would provide Aphria shareholders with 1.5714 common shares of Green Growth based on a valuation of C$7 a share. The first problem that keeps getting pointed out is that Green Growth shares closed on Friday at C$5.11, not C$7. On Thursday, it closed at C$4.98. Does the company know something that the rest of the market doesn't that would cause the shares to jump that much?

It's possible. Cornerstone Investments pointed out that Green Growth stock has increased roughly 50% in the past month on little news. It was awarded seven retail licenses in Nevada and acquired a few small properties, but none of these transactions warrant such a big move. Currently, the company only operates one dispensary in Las Vegas and a cultivation facility in Nevada.

Green Growth is new to the cannabis industry. It is made up of former Victoria's Secret executives whose pitch is that no one in cannabis understands retail like they do and they will show all the cannabis industry executives how it is done. Take that MedMen CSE: MMEN!

Let's unpack this for a moment. Victoria's Secret is part of L Brands (LB) , which laid off many of its executives a few years ago when the company began tanking because women began to reject the company's products and sales plunged -- not unlike the bras. Three years ago, L Brands was a $99 stock and it was lately trading at $25.46. Selling over-priced, poor-quality brassieres in a limited amount of sizes was not the best retail plan, it turns out.

Plus, the company completely missed the huge shift in women's mindsets who were dealing with campus rapes and body acceptance issues. These men were still selling pushup bras to women who were yelling #MeToo. These are the same people that now say they know how to sell cannabis.

The dispensary it purchased in Las Vegas, The Source, was already doing $17 million in sales a year, so it seems like they must know something about selling cannabis already.

Hindenburg Investment Research is a short seller that has already publicly thrashed Aphria for its Latin American investments. As a short seller, it is in their interest to see the stock move down, not up, which is exactly what happened when the bid was made. The stock rose 12% on Friday to close at $6.26. So, it fits that HIR would feel negatively about the offer.

What HIR did point out was Green Growth's "Second-largest shareholder is a fund sponsored by Green Acre Capital. A firm that lists none other than Aphria CEO Vic Neufeld on its board of advisors." Neufeld also announced on Thursday that he was stepping down as the Chairman of the Board of Aphria, but remaining as a director and CEO of the company.

HIR questioned how "Hostile" the bid could be if Aphria's CEO is an investor in Green Growth through the fund Green Acre? HIR also points out that the key backer of Green Growth is the Schottenstein family, which worked with Aphria to bring medical dispensaries to Ohio a year ago. The Schottenstein Family also owns stakes in DSW and American Eagle Outfitters, which also supplied many of the executives that are now at Green Growth. Again, it looks quite cozy and not hostile at all.

Green Growth said that it already has the support of 10% of the Aphria shareholders. "We believe our offer will create value for both Aphria and Green Growth shareholders. We are confident that the significant premium we are offering and the opportunity to participate in the growth of a stronger, combined company are so compelling that we are taking our offer directly to Aphria's shareholders. Together, we can unleash synergies between our teams, assets and geographies, forming a combined enterprise that will accelerate our collective growth strategies in Canada, the U. S. and overseas," said Peter Horvath, CEO of Green Growth.

Since Aphria's stock has sold off from approximately $13 in November to almost $4.50 in early December, there aren't quite so many shareholders to worry about. So whether the deal makes sense or not, unsuspecting shareholders could potentially approve it. Thus, pushing up the stock price by the experts of pushups.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Borchardt had no positions in any of the securities mentioned.

TAGS: Fundamental Analysis | Investing | Stocks | Global Equity | Cannabis

More from Stocks

You Don't Have to Trade All at Once

James "Rev Shark" DePorre
Sep 23, 2023 10:00 AM EDT

Trading in multiple time frames not only reduces risks, but also provides strategic flexibility. Let me show you what I mean and how to do it.

FS Insight Weekly Roadmap: Market Response to Hawkish Fed Is an Overreaction

Tom Lee and the FSI Team
Sep 23, 2023 9:10 AM EDT

Here's why we believe 'higher for longer DUE to higher GDP' has a more dovish tone, and remain constructive for the rest of the year.

This Dividend Aristocrat Has All the Raw Materials to Make It a Top Pick

Bob Ciura
Sep 23, 2023 7:30 AM EDT

This name has been down, but now I think it's charged up to cruise into the year's end.

The Bears Just Moved Into Wall Street

James "Rev Shark" DePorre
Sep 22, 2023 4:26 PM EDT

Technically, the bears are in control of this market now.

Don't Be a Sap and Step Into a Value Trap

Bret Jensen
Sep 22, 2023 12:30 PM EDT

There are plenty of stocks that look like value plays but aren't as the market continues to drag more share prices down.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:20 PM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Trading in Multiple Time Frames
  • 10:24 AM EDT BRUCE KAMICH

    This Could Get Messy

    A number of key stocks are getting close to import...
  • 01:41 PM EDT CHRIS VERSACE

    Latest AAP Podcast With Helene Meisler!

    Listen in as the Action Alerts PLUS podcast talks ...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login