Cannabis producer Aphria to review acquisition slammed by short sellers

Marijuana producer Aphria Inc. says its board of directors has appointed a special committee of independent directors to review the company's acquisition of Latam Holdings Inc., which has been criticized by short sellers.

The company says it remains confident in the deal, but is undertaking the comprehensive review in the face of what it called "inaccurate and misleading accusations" by the short sellers.

Quintessential Capital Management and Hindenburg Research have alleged that the cannabis grower's acquisition of assets in Colombia, Argentina and Jamaica totalling $280 million US from Scythian Biosciences were "largely worthless."

The accusations Monday put the company's shares into a tailspin. They dropped sharply three days in a row and recovered slightly on Thursday.

New allegations

Hindenburg released a second report on Aphria on Thursday, alleging irregularities around another of the company's international acquisitions, Liberty Health Sciences.

The report says that it was purchased through a newly formed shell company that netted the holders an estimated $5 million in six days.

"Unnamed individuals bought 242 million shares of Liberty in a highly dilutive $0.001 private placement mere days after Aphria announced its intention to purchase its shares at 208 times the price," the report says.

The Leamington, Ont.,-based cannabis company says its special committee includes John Herhalt, Shlomo Bibas and Tom Looney.

Herhalt, who is the lead independent director and the head of the audit committee, will lead the special committee.

Shares in the company were up about 32 per cent, or $1.63, at $6.63 in trading on the Toronto Stock Exchange Thursday.