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Pot producer Aphria’s CEO to step down following short-seller allegations

Pot producer Aphria’s CEO to step down following short-seller allegations
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Beleaguered cannabis producer Aphria Inc.’s chief executive officer is stepping down following short-seller allegations that have hit the company’s stock.

CEO Vic Neufeld and co-founder Cole Cacciavillani “are both nearing the end of their five-year journey with the company and will transition out of their executive roles over the coming months but remain on the board,” the company said in a statement Friday.

Vic Neufeld, president and chief executive officer of Aphria Inc., speaks during the Canada Summit in Montreal, Quebec, Canada, on Sept. 7, 2017. Neufeld and co-founder Cole Cacciavillani are both stepping down from their roles at the cannabis company.  (Christinne Muschi / Bloomberg)

Newly appointed chairman Irwin Simon and President Jakob Ripshtein, who joined the company from Diageo Plc in May, will “complete a smooth and responsible transition to a globally-minded executive leadership team,” the company said.

The leadership transition comes after short sellers Hindenburg Research and Quintessential Capital Management sparked a plunge in Aphria’s shares last month after alleging the company bought assets at inflated prices from insiders. Since their report was released on Dec. 3, the company’s stock has fallen 17 per cent.

“We continue to have the greatest pride in what Aphria has achieved, and its future has never looked brighter,” Neufeld said in a statement Friday.

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

Aphria is also the target of a proposed $2.8 billion hostile takeover bid by Green Growth Brands Inc., which has raised further questions about connections between the two companies.

Cannabis sales rose 92 per cent to 3,409 kilogram equivalents, with more than 1,900 kilograms of that sold to the Canadian recreational market after pot was legalized on Oct. 17. However, its average selling price fell to $6.54 per gram from $7.12 in the prior quarter due to lower average prices in the recreational market compared with the medical market. As a result, adjusted gross margin fell to 47 per cent from 64 per cent in the prior quarter.

The company said it expects to produce 255,000 kilograms of pot by the end of 2019, up from 35,000 kilograms currently, as new facilities come online.

Aphria’s stock fell 4.6 per cent to $6.28 (U.S.) as of 8:22 a.m. in pre-market trading in New York. Cannabis peers Aurora Cannabis Inc, Cronos Group and Canopy Growth also fell in early U.S. trading.
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