Aphria Seeking ‘Alternatives’ for US Cannabis Assets

Aphria (TSX:APH; OTCQB:APHQF) announced on Thursday (February 1) it might be willing to part ways with its assets in the U.S. cannabis market, after months of being embroiled with regulators on the legality of these.

Aphria announced it is actively looking to eliminate their position in the U.S. market. According to their announcement, Aphria is considering “strategic alternatives” to their interests below the Canadian border, “including the possible divestiture of its investments to strategic, long-term and committed investors in the cannabis industry.”

The company holds a subsidiary based in Arizona, cannabis producer Copperstate. According to a report from The Globe and Mail, Aphria plans to sell its stake to Liberty Health Sciences (CSE:LHS) a cannabis operator, which launched with the support of Aphria.

“The two sides have all but agreed on a price, Mr. Neufeld says, but the transaction has not yet been finalized and requires final approval from the controlling shareholders of Copperstate,” The Globe and Mail wrote.

According to the report, Aphria is looking to also sell nearly 25 percent of their stake in Liberty Health.

“To realign things makes so much sense, to move into good hands our Liberty shares and get out of the cloud that the TSX has casted on many of us with U.S. assets,” Neufeld told The Globe and Mail.

TMX announced it would dispute Canadian cannabis companies with US interests

Last year the TMX Group, which oversees the Toronto Stock Exchange (TSX) and TSX Venture Exchange issued a notice to staff announcing it planned to stop Canadian companies from holding assets or be directly involved with operations in the U.S.

When the notice was sent Vic Neufeld, CEO of Aphria, issued a statement saying the notice was “extremely broad” and didn’t properly see the context needed for the split between federal and state laws.

Since the original notice, TMX Group and Aphria have gone back and forth on the issue. Now it appears Aphria is willing to concede to the request from the Canadian exchange.

Aphria is one of the biggest Canadian cannabis licensed producers (LPs) in the public market, and as such, it looked for ways to expand its reach. The market in the U.S. has been promised to be one of the biggest available for companies in this space.

However, on a federal level marijuana is still an illegal substance, causing Canadian exchange regulators to be particularly careful of the companies listed there.

In January the option for Canadian companies to look for options in the U.S. took another hit after Attorney General Jeff Sessions rescinded the Obama-era guidance that allowed states to states to police the legal use of marijuana.

Investor Takeaway

Experts had kept a close eye on the development of this case as it would determine the possibility of Canadian companies being able to invest and look for interests in the growing U.S. market.

Clearly, the TMX isn’t backing down and has now caused one of the biggest LPs to seek a reduction of their presence in the American cannabis market.

Aphria closed on Thursday with a 12.39 percent decrease, and while this announcement may have played a part in this reduction, the entire industry suffered a downsize from a market correction. Liberty Health finished the trading day with a 14.77 percent drop in its share price.

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.