Companies and Brands

Aphria Stock Floats on Liquidity While Competitors Stumble

Carl Sullivan

Published: May 21, 2020 8:15 am

Green Growth Brands is the latest downer for the legal marijuana industry. The Columbus, Ohio-based cannabis company, which once tried to acquire Aphria (NYSE: APHA), filed for bankruptcy Wednesday.

Green Growth said it sought protection from creditors “due to a severe liquidity crisis,” which was exacerbated by the coronavirus pandemic. The company said it had been forced to close its cannabidiol (CBD) business and severely restrict sales at its The+Source dispensaries in Las Vegas due to a state order.

“The announcement marks a fall from grace for the company which eyed Aphria last year in an attempt to become a North American cannabis giant,” BNN Bloomberg reported. Aphria rejected Green Growth’s C$2.8 billion offer last year.

A Rare Profitable Business

Today, Aphria is a bright spot among the lagging category of pot stocks. The company reported surprisingly good earnings a few weeks ago, showing a profit on strong sales.

“Our growth has enabled us to be one of the few profitable, publicly traded distributors,” CEO Irwin Simon said last month. EBITDA (earnings before interest, taxes, depreciation, and amortization) has also been positive for the last four quarters.

Aphria shares closed at $3.63 on Wednesday, up 2.54%. Year to date, Aphria is down 30.46%, compared with the S&P 500, which is down 8.02% for the same period. Pot stocks have generally trailed the S&P recently.

Aphria has over 1,000 employees and operations in 10 countries. The company has reported revenue growth on recreational marijuana for several quarters now. In the pharmaceutical space, Aphria says medical cannabis sales jumped 18% after coronavirus lockdowns began.

The company sold 14,014 kilogram equivalents of cannabis in its fiscal third quarter, up 98% from the previous quarter. Adult-use cannabis accounted for 8,171 kilograms, while medical products accounted for 1,352.

In its latest financial results, Aphria reported C$515 million in cash or cash equivalents. That liquidity is just what the doctor ordered in a down economy, and the strong balance sheet sets Aphria apart in the publicly traded cannabis industry. Like many companies, Aphria pulled guidance for the rest of the year due to uncertainty around COVID-19.

Aurora Moves Into US Market

In other pot industry news, Aurora Cannabis Inc. (NYSE: ACB) Wednesday said it will acquire U.S. hemp retailer Reliva LLC for $40 million in stock, plus $45 million in stock or cash if certain financial targets are achieved. The acquisition is Aurora’s first official foray south of the border, according to BNN Bloomberg.

“We firmly believe that the combination with Reliva will create significant long-term value as Reliva provides us options to grow in hemp-derived CBD internationally,” said Aurora CEO Michael Singer. Reliva is reportedly a profitable business, selling creams, tinctures and beverages with CBD, the non-intoxicating form of cannabis.

Aurora is another cannabis company with a positive story. In its last earning report, Aurora beat analysts expectations on revenue, thanks to a jump in sales.

Aurora stock closed at $12.25 Wednesday, down 12.97%, but was up sharply in after-hours trading on the Reliva news. Year to date, Aurora is down about 50%.