Article by Cowboy Tom, HubPages
Negative sentiment with Aphria
Aphria (APHQF) has had to endure a lot of negative press so far in 2018, with its share price taking a big hit as a result. A lot of that has been attributed to the Nuuvera acquisition, although I think there is more to it than that.
With the general cannabis market considered to be overvalued at this time, it’s worth taking a look at why Aphria has been sold off more than its peers so far in 2018.
In this article we’ll look at whether or not the market has overly punished Aphria in regard to Nuuvera, and what the implications are for the broader cannabis market on the production side of the business.
The biggest concern aired concerning the acquisition of Nuuvera by Aphria was the price tag itself, which was C$826.0 million. Most of that response came from the idea the company being little known by the market.
Although I see no relevancy to this alleged issue, there were reports on the fact executives at Aphria has taken a position in Nuuvera without publicly disclosing that information, implying it was a shady deal and other such things, even though there is absolutely no legal requirement to make the disclosure.
On the first issue, it’s really an odd thing to conclude in regard to the notoriety of a company being the determining factor in its value. It makes no sense really.
Take Warren Buffett. We’ve seen him make a number of acquisitions or taking of big positions in companies that cause a lot of investors to scratch their heads through the years. Just because the overall market doesn’t see the value doesn’t mean it doesn’t exist. Or if it’s off the radar of investors doesn’t imply it doesn’t have value.
As for the public disclosure non-issue, I don’t even see why it has been included in the conversation. About the only thing that can be observed there is the marijuana industry, because of it continuing to be illegal in many countries, generates a negative outlook on the sector to some. So any type of behavior that may even suggest impropriety can disproportionately impact a company. Even that’s stretching it in my view. After all, lots of investors have had positions in a company before making an offer for the entire firm.
I belabor this a little bit to point out what I think the real issue is with Aphria. How I see it is the cannabis industry is probably overvalued. So when any type of negative press is applied to a particular company, the market can over respond and drive the share price down, as the shorts take over. That’s without a doubt what has happened with Aprhia, as it really isn’t doing anything different than its peers are doing.