Aphria Inc.’s chief executive will step down from the top job citing the “toll on health, family and personal priorities,” but Vic Neufeld says the decision is unrelated to recent short-seller allegations that have hit the cannabis producer’s stock.
The Leamington, Ont.-company also announced Friday that co-founder Cole Cacciavillani will also leave his current role as vice-president growing operations in the coming months, but both he and Neufeld will remain on the board.
The past five years have been an “incredible journey” but it is time for a “globally minded” executive team to lead Aphria into the next chapter, said Neufeld.
“It was just time for us to move aside,” he told analysts on a call discussing Aphria’s latest quarterly earnings. “This has nothing to do with the short-sellers’ report, the review, the valuation of assets … It was time.”
Neufeld said he and Cacciavillani will begin the transition process immediately and step down from their executive positions “at the appropriate time.”
Aphria’s independent chairman Irwin Simon and president Jakob Ripshstein will manage the transition.
Neufeld and Cacciavillani are “consummate entrepreneurs and the Aphria dream would not have become a reality without them,” Simon said on the conference call.
“During this transition period, we’re going to work hard to benefit from their mentorship,” he added.
Shares of Aphria Inc. rose by as much as 9.6 per cent on the Toronto Stock Exchange to $9.55 on the news but were up 4.6 per cent at $9.11 in early afternoon trading.
Aphria faced allegations in December by short-sellers questioning the company’s acquisitions in Colombia, Argentina and Jamaica. Shares in the company plunged in the wake of the report by Quintessential Capital Management and Hindenburg Research.
The two short-sellers alleged that Aphria’s acquisition of assets totalling $280 million were bought at “vastly inflated prices” as part of a scheme orchestrated by a network of insiders.
Shares fell as far as $5 in Toronto from its price of $10.51 on Nov. 30, the last day before the short-sellers’ report was released.
Aphria has denied the report, but established a special committee of independent directors to review the deals.
This independent committee is making “good progress,” and intends to fully address the short-sellers allegations, Neufeld said Friday. He would not quantify how much longer the process will take, but said it would take longer than “days.”
Aphria also received a hostile takeover offer late last year from Ohio-based Xanthic Biopharma Inc., which does business as Green Growth Brands, that it rejected as being too low.
There is no active offer for the company, Neufeld told analysts, and Aphria’s board of directors has established an independent committee of directors to consider proposals and formal offers received.
The proposal presented by Green Growth Brands was determined to “significantly undervalue” the company, he added.
“I continue to have the greatest pride in what Aphria has achieved and its future has never looked brighter,” Neufeld told analysts.
The change in Aphria’s executive suite came as Aphria reported revenue totalled $21.7 million in what was its second quarter in the midst of recreational cannabis becoming legal in Canada, up from $8.5 million a year ago.
Analysts on average had expected revenue of $37.9 million, according those surveyed by Thomson Reuters Eikon.
Aphria earned a profit of $54.8 million or 22 cents per share for its quarter ended Nov. 30, compared with a profit of $6.5 million or five cents per share for the same period last year.
The company attributed the increase in profit to gains on its long-term investment portfolio, primarily from divestitures of positions in Hiku Brands and Liberty Health Sciences.
However, since the legalization of adult-use pot on Oct. 17 there continue to be product shortages, constraining recreational sales. Days before legalization, Neufeld had warned of product shortages due to supply chain problems, such as delays with required government excise stamps.
“The entire industry has not met the expectations of provincial regulators,” Neufeld said on Friday, but noted that many of those supply chain issues “have now been worked out.”
Companies in this story: (TSX:APHA)
Armina Ligaya, The Canadian Press