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No. of Recommendations: 4
A cannabis analyst who I respect a great deal, doesn’t think they are criminals or liars. There are disturbing facts, like “Building 51”, “The lady who said she is not a director,” and “the missing scientist.” He doesn’t think Aphria are criminals and liars, but their due diligence failed. He thinks the wipe out of the potentially bad investments have been priced into the company. Of course, the potential for fraud exists, but again, he thinks fraud is not there, but you never know.

He does not expect a SEC investigation. Just his views, and perhaps he isn't correct. It is helpful to hear his views though. He certainly is disturbed by this but is expecting that the culprit is poor due diligence. Again, just his thoughts, we are early in this information stage, and we need to "stay tuned."


Due diligence?

You are being pretty generous. This is not a case of directors buying a company that is worth less than they thought. This is a case of company directors (de Francesco in particular) going out and buying some fairly banal assets (a house in Jamaica, a small warehouse, a permit application) for less than $1 million, then selling that for tens of millions to an intermediate company partially owned by Aphria (Scythian, recently renamed SOL*), and then getting Aphria to buy those assets for hundreds of millions, all within a few weeks. If the explanation is not transferring Aphria cash to directors’ pockets, I’d like to know what it could be. The story is not one of gullible Aphria directors buying some assets from a third party at an inflated price, it’s Aphria directors scheming to get gullible Aphria shareholders to buy these worthless assets for hundreds of millions.

One can perhaps make the argument that a loss of several hundred million does not in itself make Aphria worthless, given its other assets, but only if this was just a mistake, not a fraud. I can’t see how anyone who has read the QCM report carefully could come to any other conclusion than fraud.

*By the way, what is the meaning of SOL Global? Is this an abbreviation??



On another note, yet it rhymes, Nuuvera was purchased in July 2018. There were rumblings of disclosures of insider relationships not being disclosed. I am not familiar with how the investment community perceived this. The same analyst I referred to above mentioned, “Nuuvera was nasty. There were no legal requirements to disclose this, but it sure looked bad. I think companies need to do much better than "the bare minimum.”



I fear this story of insider dealing, and the fact that they seem to have gotten away with it, may have given them confidence that insider dealing is not punished. They may be right, and the company may survive, but I wouldn’t want to count on that, and this insider dealing seems much more brazen than in the previous case. I don’t think we should be applying Canopy/Aurora/Cronos multiples given what certainly appears to be egregious corporate malfeasance at Aphria.

DTB
Short Aphria, a small position given the uncertainty but I would say 50% chance of bankruptcy seems reasonable to me.
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