Aphria Stock Drops After Announcing $100 Million Strategic Investment

Aphria stock

Aphria stock is starting the week in the red after the company announced that it had secured a US$100 million investment from an unnamed institutional investor.

Unnamed Investor

The unidentified investor will acquire approximately 14 million units in Aphria Inc (TSX:APHA) (NYSE:APHA) at a price of C$7.12 per share. Each unit will include one Aphria share and one-half share purchase warrant, with a whole warrant entitling the holder to acquire one Aphria share at a price of C$9.26 for a period of two years from the closing date of the offering. Aphria said it plans to use the capital to finance further international expansion, as well as for working capital and general corporate purposes.

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Underwhelming Earnings

The announcement comes less than two weeks after Aphria Inc posted its second-quarter results, which saw a net loss of C$7.9 million compared with a profit of C$54.8 million in the same period a year earlier. Aphria did manage to grow its net revenue to C$120.6 million; however, the Leamington-based firm slashed its outlook as a result of delays in opening additional Ontario cannabis stores and a ban on vape products in Alberta. The company now expects net revenue for 2020 to be between C$575 million and C$625 million. Aphria stock is currently trading for $4.94.

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Aphria Stock Looks to Capitalise on EU Market

Speaking on last week’s investment, Aphria CEO Irwin Simon said, “It shows [the investor] is a believer in the [cannabis] category where a lot of licensed producers have had trouble finding any type of financing.” However, he declined to name the investor due to a confidentiality agreement. Simon added that the investor will assume less than 10% ownership of the company if the warrants are exercised in full. Aphria stock is down nearly 15% since the investment was announced.

However, Simon did say that Aphria Inc has earmarked the funds for “opportunistic” international expansion efforts, and last week, its German subsidiary ARA-Avanti Rx Analytics was awarded GMP status in the European Union, boosting Aphria stock to a 2020 peak of $5.76.

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